Retirement Planning in Austin TX

Achieving a comfortable retirement is a big task. How do you prepare for 25 years –a typical retirement horizon–  of life without earnings from employment? How much savings do you need before you can retire? How much will you be able to spend every year in retirement? Just like anything hard to achieve, your best bet at a comfortable retirement is to make a plan and work consistently towards it.

This post gives you some tips and guidelines to get you started. Whether you are just starting your career or are nearing retirement, even a few simple steps today can go a long way to put you on the right track.

Many in Austin, Texas, and around the country are struggling to save for retirement. We focus on our career goals, have loans to pay, and expenses just seem to pile up on us. We think retirement can wait until we make more. However, the more we earn, the more we tend to spend, and little thought is left towards saving for retirement.  One of the biggest mistakes that many Americans make is assuming they can get on the right track and save as much as they need to when they feel the time comes. However, here is the truth: You can’t just save your way to a comfortable retirement. You need a plan.

Retirement Planning Decisions, Saving to live in Texas

There are five significant decisions to make when planning for retirement:

1. How much do I need to save? 

The first decision you need to make is how much money you need to save. While this decision depends on a number of factors, including your expected future income, most people should save between 10% and 20% of their income. For some people, these levels may be a goal, especially when they are starting out. If you can’t save at least 10%, save as much as you can and plan to increase your savings rate to 10% or higher later on. Use your pay raises and bonuses over time to increase the level of your savings. 

2. How should my savings be invested? 

If you work for a company that offers a tax advantaged plan like a 401(k) or similar, you should start there. If the company offers a match to your savings, take advantage of that. If your income is high enough, saving 10%-20% may take you over the allowed limit ($20,500 in 2022). In this case, consider contributing to an IRA or a taxable account. If your company does not offer a plan or you are self employed, you can create your own plan following these suggestions. 

Your retirement savings should be invested to help you grow your nest egg. But how should they be invested? Many company sponsored plans offer low cost target date funds as their default options. These are a good option for the uninitiated investor, both in and outside of a company plan. In general, opt for low cost funds that target broad markets and use a mix of stock funds and bond funds to manage your risk. While younger investors can invest more heavily in stock based funds, older investors should gradually increase the percentage of bond funds they hold.

4. What kind of lifestyle do I want in retirement here in Texas? 

We started with saving and investing. However, a big determinant of whether you can afford to retire or not depends on what retirement looks like for you. Ask yourself, what kind of lifestyle do I want in retirement? Then figure out what that might cost, on an annual basis. We recommend you make a budget of your current spending first, then think about expenses that will change in retirement. Your mortgage payments may be paid off, your kids may be out of college, so some expenses will decline. Other expenses may increase, particularly travel and health care.

Making a budget and understanding retirement costs will also help you find more savings and commit to saving for retirement. 

3. How much can I withdraw from my Investments? 

Having a yearly income target for retirement expenses helps you determine how much money you need to be able to retire comfortably. Once you have your annual income target, subtract your estimated Social Security benefit. For example, a couple that needs $80,000 a year in retirement and can count on $40,000 in Social Security benefits, have a target income goal of $40,000 from their retirement savings. A common rule of thumb in retirement planning is to withdraw 4% of your initial retirement savings. So for a $40,000 income goal, you need to reach about $1 MM before retirement. You can make a retirement income projection to check that your savings are in line with your goal.

Keep in mind that the rule of thumb above is just that. Other factors may contribute to determining a sustainable retirement income from your savings, including the taxability of your savings, your retirement horizon, and your risk tolerance.

5. Do I Need to Discuss Retiring with a Financial Advisor or Wealth Manager in Texas?

Answering the four crucial questions above requires planning, an understanding of your goals and priorities, and a good amount of investing and tax planning knowledge. So the fifth question you have to ask is whether you are better off working on your plan or seeking the help of a trusted advisor like us at Desmo Wealth Advisors. Research shows that investors that seek the help of an advisor have higher returns over long horizons after adjusting for risk. A good portion of the higher return comes from the value of planning and helping investors stick with a plan.

However, you should know that not all advisors are created equal. Keep in mind that what you are looking for is expert and objective advice that can help you address the key retirement questions we posed. Many self-proclaimed experts will try to sell you their products in order to earn a commission, so it is essential to do your research before selecting an advisor.

Finding The Best Financial Advisor in Austin TX to Discuss Retirement

With many financial advisors in Austin, TX, how do you choose? The ideal advisor has the experience and expertise to address your questions, and his or her incentives are aligned with your best interest.  Desmo Wealth Advisors was founded with the mission of providing fiduciary based, objective, and expert advice. If you are looking for the best financial advisor in Austin, consider working with someone who has a long track record of success and is a fiduciary, like Massi De Santis. 

A fiduciary is a term that refers to someone who is legally obligated to act in your best interests at all times. This contrasts with an advisor that is not a fiduciary, who may receive commissions or kickbacks for investments he or she recommends.

When looking for a financial advisor, it is essential to ask them if they are fiduciary.  Look no further than right here: Desmo Wealth Advisors your Fee-Only Fiduciary to help with Retirement Planning

Discuss Retiring with a Fee-Only Fiduciary vs. Fee-Based Fiduciary

It is also essential to understand the difference between a fee-only fiduciary and a fee-based fiduciary as you plan for your future. A fee-only fiduciary only charges fees for the services they provide and do not receive commissions or kickbacks of any kind based on the investments they recommend. In contrast, a fee-based fiduciary may receive fees and commissions from the financial products that they sell you. The fee-based structure can lead to conflicts of interest that could influence them into selling you products that are not in your best interests.

What is a Fiduciary, How can they help plan for Retirement?

A fiduciary is someone who has a legal obligation to always act in your best interests at all times. The fiduciary duty includes the legal duty of loyalty, duty of care, and duty to follow client instructions. As a result, fiduciaries are much less likely to sell you products that aren’t in your best interests. The fiduciary obligation is included in the ethics code and standards of CFP® professionals, which is the highest level of standards in the advisory industry. DESMO Wealth Advisors adheres to these standards.

Planning for Retirement With a Trusted Advisor near Austin Texas

Planning for retirement can be a daunting task, and starting as soon as possible is essential. By understanding your needs, priorities, and the different options available to you, you can put yourself in a much better position for a successful retirement.

If you are looking for help to plan your retirement, you should consider working with a financial advisor. Austin has many advisors to choose from, but you need to work with a fiduciary and have an excellent industry reputation.

Talk to DESMO Wealth Advisors, LLC about Financial Planning and Investment Management services in Austin, TX. They can help you plan your future to provide security and peace of mind. They are highly trained professionals who understand the importance of excellent customer service. Contact us today to learn more about our services or visit our website at desmowealth.com.