Why Mom Was Right About Retirement Planning

By Jeremy Sorci | March 07, 2019

When you think of the people you rely upon most to provide retirement planning advice, who comes to mind? Your trusted wealth advisor, of course. Perhaps your best friend or your work colleague.  Perhaps even your - mom?
Jeremy Sorci is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt County

While mom might not be first on your list, perhaps she should move up a few spaces. Imagine, for a second, that you're sitting around the table after dinner, enjoying a cup of late-night decaf, and discussing retirement planning with your mom... only your mom just happens to be Warren Buffet. 

OK, maybe mom's not quite Warren Buffet, but she's got a lot of retirement advice that you should take seriously. After all, mom approaches retirement and investment planning from a practical, straight-forward position. She's forward-thinking, with a consistent focus on reaching those long-term goals. Plus, she's disciplined, sticking to her investment plan, rather than reacting emotionally to short-term market ups and downs.

Here's why mom was right about retirement planning.  

Mom's Retirement Tip #1: Start Saving Now

No matter your age or current point in your career path, listen to mom's advice and start the retirement planning process now. You may feel like you've got plenty of time to start preparing for your financial future, but the truth is simple: If you're not saving now, you're missing out on the chance to earn compound interest. For example, imagine you invest $50 a month, every month, starting at age 20. At a 5 percent interest rate, your savings will grow to $126,182 by the time you reach age 70. In contrast, if you start saving the same monthly amount at the same interest rate when you're 40, you'll end up with $40,079. And if you wait until you're 40 to start, even if you double the monthly investment amount to $100, you'll end up with $80,158... almost $50,000 less. Either way, waiting longer now translates into less savings to draw upon later.

Jeremy Sorci is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt CountyMom's Retirement Tip #2: Pay Yourself First

While mom may have discouraged certain habits when you were a child, like nail biting, she probably tried to get you to form other, healthy habits, like brushing your teeth and going to bed at a reasonable hour every night. Here's one more habit to add to the list: Pay yourself first. One of the simplest ways to get on track for retirement is by contributing a set amount to your retirement savings each time you receive a paycheck. If you're paid through direct deposit, set up an auto-transfer. When you get a raise, up your contribution accordingly. Over time, it'll become a habit mom will never nag you about. 

Mom's Retirement Tip #3: Avoid Debt and Focus on the Long Term

Remember when you really wanted that certain toy? In fact, you wanted that toy so much that you saved your allowance for months to earn enough. Along the way, however, you faced many temptations that threatened to drain your slowly filling piggy bank. Thank goodness for mom, who would gently guide you away from temptation and help you stay true to your long-term goal. As an adult, not that much has changed. While the "toys" today may be more along the lines of a new car, a home remodel, or a luxurious vacation, the principle remains the same: Adding to your debt can set your retirement back significantly. So keep that car running a few more years, put up with the ugly bathroom tile, and enjoy a relaxing, nice-enough vacation now in order to get what you really want later: financial freedom in retirement

Mom's Retirement Tip #4: Practice Discipline

When you got really worked up about something as a child, Mom probably told you to take a deep breath, calm down, and take a minute to collect your thoughts before doing or saying something you'd later regret. This is still great advice, especially when it comes to retirement investments.

When the market fluctuates — as it always has and always will — it's easy to respond emotionally, especially given that the financial media (and, unfortunately, some investment professionals) tend to take advantage of market volatility to gain ratings. But mom's childhood advice holds true:

Take a moment to relax and think the situation through before reacting. Keep your long-term goals in mind and stay the course; reacting to every market up and down will do nothing but introduce chaos into the wealth management process.  

Posted in Retirement Planning