It's completely normal to feel a little overwhelmed when you think about the future. Whether you're just starting your career, growing a family, or getting ready to step away from work, retirement is always hovering in the back of our minds. If the act of trying to save, invest, and build a roadmap feels confusing, know that you aren't alone and that your feelings are valid.
Retirement is more than a financial milestone
We asked over 100 CFP® professionals at Facet to share the one thing they wish everyone knew about retirement. Their answers might surprise you because they aren't just about money.
Most people start with questions like "How much money do I need?" or "Am I saving enough?" While financial security is critical, the happiest retirees know that money isn't the only ingredient for a fulfilling life.
What happy retirees have in common
First, they define retirement on their own terms. It isn't purely about reaching a savings number. It's about finding a sense of purpose, staying engaged with friends, and remaining connected with family.
Second, they have a personalized strategy that puts them in control of the life they want to live. To find your version of financial independence, consider these questions:
- Would you prefer to be debt free or have more retirement savings?
- How important is spending time with friends and family?
- Is it about starting your own business and being your own boss?
- Do you want to volunteer and remain engaged in your community?
- Is it important to have the freedom to travel and experience different cultures?
- If money wasn't an issue, how would you spend your time?
It's about so much more than your investments
Historically, advice has focused heavily on one thing: your investments. While your portfolio is important, there are many other aspects of your financial life that you need to consider to live well today and tomorrow.
Paying down debt
Deciding between paying down debt, like student loans or a mortgage, and investing can be tough. The right choice depends on the interest rate, tax benefits, and your personal comfort with risk.
Minimizing fees and taxes
Most people fixate on investment returns. However, the fees and taxes you pay can mean your returns are much lower than you think. We recommend focusing on low cost investments and having a strategy to reduce your taxes today as well as in the future.
Deciding when to retire
The age you choose to retire affects your healthcare decisions, investment income, and Social Security benefits. For example, according to the Social Security Administration, delaying Social Security benefits until age 70 means your benefits will be almost 77% greater than at age 62, and even 30% greater than at your full retirement age.
Planning for lifestyle expenses
Where you live and how you spend your money will dictate how much income you actually need. Controlling your expenses leading up to retirement is just as important as how much you save.
Cookie cutter advice won't cut it
When it comes to building your roadmap, many people follow general "rules of thumb." While these can be okay starting points, they are based on averages. That means roughly 50% of outcomes are above and 50% are below the general rule. Are you willing to leave your future up to a coin flip?
Here are a few common assumptions that often fall short.
The 20% savings rule
This rule suggests that saving 20% of your after-tax income puts you on track. However, this doesn't factor in when you started saving, how your taxes will change, or what to do if you can't reach that 20% mark yet.
The 4% withdrawal rule
This guideline says you can withdraw 4% from your accounts annually without running out of money. For every $100,000 you have, you can generate roughly $4,000 per year in income. But this rule doesn't account for fees, unexpected healthcare costs, longevity, or taxes (like whether your money is in a fully taxable IRA or a tax-free Roth IRA).
Replacing 70% to 80% of your income
Common advice states you only need to replace 70% to 80% of your pre-retirement income. This assumes you are already saving 15% to 20% of your income today, that your mortgage is paid off, and that your taxes will be lower later in life. Those are big assumptions that might not fit your reality.
The "ten times your income" rule
Various studies indicate you should save ten times your salary. So, if you make $150,000 per year, you would need about $1,500,000. However, if you dig deeper into those studies, the appropriate range is actually seven-to-fourteen times your annual income depending on your marital status, tax bracket, and length of retirement.
The Facet difference
Your financial journey shouldn't be based on averages or guesswork. At Facet, we believe in a membership-based model where you’ll work with a team of CFP® professionals who look at your whole life, not just your investment account. We don't charge asset-based fees that eat into your returns. Instead, we offer a flat fee for comprehensive advice that covers everything from tax planning to retirement strategy. Facet is not an attorney and does not provide tax or legal advice. Consult a qualified tax or legal professional regarding your specific situation. We also offer access to estate planning services through our partner, wealth.com, for an additional fee. It's about giving you the clarity and confidence to live the life you want, today and in the future.
