Most Americans aren’t saving nearly enough for retirement. Some workers who haven’t saved fear that they will never be able to retire. However, there may still be time to change course and reach your retirement goals. If you sit down with a financial planner or even a retirement calculator, you should be able to figure out where you stand, what you need to do now to start saving more and how long it will take to reach your goals. Here are some signs that you’re on the wrong track and need to take corrective action to retire well:
[See: 9 Easy Ways to Save $500 More Per Year for Retirement.]
1. You’re looking for a quick retirement fix. Benjamin Brandt, a certified financial planner for Capital City Wealth Management in Bismarck, North Dakota, and host of “Retirement Starts Today Radio,” says workers looking for a “quick fix” are the least likely to retire. A quick fix can involve things like chasing investment returns or looking for the next Bitcoin or penny stock that will make you rich overnight. Looking for a quick solution to your problems will only distract you from your long-term goals, says Brandt. Even worse, focusing on a quick fix can set you up for long-term losses when the latest and greatest investment comes crashing back to Earth, as many do. There aren’t any quick fixes for a failure to save. If you want to retire on time — or ever — you need to come up with a comprehensive long-term investment plan that is both realistic and actionable. Searching for a quick fix will do nothing except set you up for failure.
2. You’re spending without a plan. Another sign you’ll never retire is if you’re spending your income as soon as it comes in. Brian Hanks, a certified financial planner in Salt Lake City, Utah, has some clients who struggle to save due to overspending, especially on cars and houses. “If you’re older than 30 and your car is worth more than the combined value of all your savings, that’s a sign you’ll never retire,” Hanks says. This is equally true no matter what you’re spending your excess funds on, whether it’s cars, boats, homes you can’t afford or fancy vacations. Overspending is the root cause of many financial failures.
[See: 10 Ways to Repair Your Retirement Finances.]
3. Paying off debt is not a priority. Debt is a major reason many people delay retirement. Medical debt, credit card debt and auto loans can make it very difficult to retire, because you are still paying off past expenses. If your goal is retiring one day, you should strive to pay off all your debts in a timely manner, then avoid going back into debt at all costs.
Mortgage debt also makes it more difficult to retire because those monthly payments contribute to a higher cost of living in retirement. Paying off a mortgage is often a major factor in determining whether you can stop working. Joseph Carbone, a certified financial planner for Focus Planning Group in Bayport, New York, says some clients are able to retire with a mortgage because they have a carefully crafted retirement plan that affords them enough monthly cash to cover their payments and their living expenses, but not everyone can afford to make mortgage payments using their retirement income.
4. You live paycheck to paycheck. One telltale sign you’ll never retire is if you’re living paycheck to paycheck and have no plans to break the cycle. “In my years working with individuals, I have never met someone who lives paycheck to paycheck that has adequate savings,” says Matt Adams, a financial advisor and partner at Money Methods in Amarillo, Texas. “As a matter of fact, most are even drowning in debt.”
Breaking the cycle of debt is simple, but not easy. Finding ways to spend less and bring in more income must become a major priority each and every day. If you’re looking for ways to save money, try tracking your expenses to see where your excess cash goes every month. If you watch your bank and credit card statements closely, you may find you’re spending more than you think in discretionary categories like dining out, entertainment and shopping.
Of course, finding ways to reduce your spending is only part of the equation, since earning more money can also help your situation. If you can’t pick up more hours at work, consider starting up a side hustle like driving for Uber or learning a skill you can do for money in your spare time.
If you continue living paycheck to paycheck and don’t find some way to build up a buffer between your earnings and your spending each month, you will never retire.
[See: 10 Alternatives to Full-Time Retirement.]
5. You’re not building a reliable monthly income. To retire comfortably, you need to build up a stream of passive income you can use to pay your expenses after you quit work. Most people without a guaranteed pension create a nest egg by saving in a retirement account such as a 401(k) or IRA for decades and by investing in a brokerage account, real estate or alternative investments.
Without these sources of income, you’ll have nothing but Social Security to fall back on. You need to start saving and investing for retirement as early as possible so your money has time to grow and compound. If you’re not taking the time to build up assets for retirement, your only source of retirement income could be Social Security. Retirees who survive on Social Security alone may need to live incredibly frugally just to barely scrape by.
A comfortable retirement won’t happen on its own. Retirement is a milestone you achieve after years of diligent and consistent saving. If you don’t put in the work required to retire, you may never get there.
Jeff Rose is a certified financial planner, U.S. combat veteran and the founder of GoodFinancialCents.com.
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5 Signs You Will Never Retire originally appeared on usnews.com
