The Key Traits Successful Retirees Share

While not everyone is prepared for retirement, some older Americans are doing quite well. Let’s explore some common characteristics that successful retirees have in common.

According to a survey of more than 2,500 people with 401(k) plans and/or rollover individual retirement accounts (IRAs) by investment firm T. Rowe Price, the top factors that contribute to a secure retirement include:

• Flexible spending habits
• Considerable savings
• Income earned from another job

Adapting these three characteristics into your own retirement could give you a more stable future.

1. Be flexible with your spending

According to a survey by T. Rowe Price, many retirees exhibit flexible spending habits: Three in five would prefer to spend more or less depending on the market to maintain the value of their savings and investments, rather than maintaining the same spending levels from year to year and risking a decline in their portfolio.

A willingness to be flexible about spending is “absolutely critical” before and during retirement, says John R. King, a certified financial planner with Austin, Texas-based Pegasus Financial Solutions.

“Pre-retirement spending is important because the less you spend, the more you’ll save,” he says. “Cutting back on your spending in retirement means [your money] Long lasting.”

To test how spending will affect retirement income, King often runs “what if” scenarios. In one case, he increased a couple’s spending by $10,000 a year and ran some projections. The clients were in their early 50s, so the increase in spending began then. With this increase, King found that the couple would have a $2 million surplus at age 97, but would run out of money at age 93.

“They were saving a significant percentage of their paycheck, but an additional $10,000 in expenses significantly reduced their savings rate,” he says.

While each case is different and these may not be typical results, they do show how spending habits can affect retirement savings.

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2. Save enough – Save early and often, and catch up if you fall behind.

Spending is closely related to saving, and “how much you can actually save is determined by your spending,” King says.

“The three most powerful components of a financial plan are knowing what you’re spending, knowing that you also have to save, and the earlier you start saving, the better,” says Jeffrey Bogue, a certified financial planner with Bogue Asset Management, based in Wells, Maine. “After that, everything seems to fall into place.”

Many retirees with 401(k) plans or IRAs have substantial savings, and 48% have $500,000 in household wealth (investable assets and home equity combined, minus debt), according to a T. Rowe Price report.

While the amount you need to save for retirement will be determined on a case-by-case basis, there are certain steps everyone can take to create a stable retirement plan.

Keeping savings accounts separate can help retirees stay on track to ensure their spending patterns don’t affect their savings, Borg says.

Your different savings accounts or “buckets” should represent your short-term, medium-term, and long-term commitments or goals. For example:

• One account holds funds for prior payments, such as a mortgage or other bills.
• The second is saving for mid-term and long-term goals, like buying a car, taking a vacation, etc. This bucket includes retirement accounts such as 401(k) plans.
• The third is the “middle” which is a 7-14 day cash flow bucket for everyday expenses like gas, groceries and recreational activities.

“It gives everybody a plan,” Borg says. “It’s a lot better than saying, ‘OK, let’s create a budget,’ and then at the end of the month, ‘Did I win or lose?'”

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3. Employment – ​​Work after retirement

Sometimes adjusting your spending habits and creating a savings plan isn’t enough to help you live comfortably in retirement. In these cases, many people turn to taking on a part-time or full-time job to bring in additional income.

“Retirement isn’t necessarily a decision to work or not work, but a decision to work on your own terms,” ​​Borg says.

Nearly one-fifth (21%) of T. Rowe Price survey respondents have left the workforce but have returned to work part-time or full-time, and another 14% are searching for work.

“I think we’re going to see more of this as more people realize they need more room in retirement,” King says. “Adding in part-time work can help plans work that wouldn’t have otherwise.”

Other Factors That Contribute to a Secure Retirement Plan

In addition to spending less, saving more, and being willing to work longer or beyond retirement, there are other traits that can help retirees feel secure in retirement.

A study by T. Rowe Price found that:

• Nearly half (48%) of retirees say they have a withdrawal plan, and the median retirement withdrawal amount for them was 4% of investable assets over the past year.
• On average, retirees report living on just 66% of their pre-retirement income, below the 70% to 80% that some financial planners and investment firms suggest people consider when planning for retirement.

While everyone has different needs and wants, all of these characteristics can help steer pre- and post-retirement people in the right direction.

“It’s all connected, and of course saving more and spending less is the key to it all,” King says. “Have a goal and know how much money you need to have saved by retirement to live the lifestyle you want.”

Take action now

What can support the development of the attributes outlined above? Creating and maintaining a comprehensive financial plan.

Take control of your financial wellbeing with the NewRetirement Planner.