It’s all a Numbers Game

Numbers Game

It is no secret that 2020 has been an unexpected year so far, but Jill and I are trying hard to bring a sense of normalcy to our lives where we can. Luckily, this meant a recent trip we took to Naples, Florida, for some R&R (taking all the necessary safety precautions, of course). From my take, Naples is definitely a retirement community. Though we had to duck the occasional rain shower, Naples has thus far been spared from the large tropical storms of the season, so I enjoyed a week of golf, (mostly) sunshine, exercise and a few happy hours. As Jill and I sat there on 5th Avenue during one of those happy hours, I concluded that a successful retirement is kind of like being in college . . . but with a few bucks.

On the flight back home, I started thinking about and all those retirees’ lives and how they are enjoying the good life in Naples. I got thinking about how at some point in time, they made a calculation; they estimated their retirement number so that they knew when it was time to begin their indefinite “vacation”.

It brought to mind those old commercials with the people carrying around the big orange numbers, representing the amount of money they need to comfortably retire. I think it was an old Voya commercial. Those big numbers were meant to highlight the challenge of creating a defined path to accumulate the amount that each individual needs to retire comfortably. 

So, this was the topic of discussion between Jen and I on our weekly radio show this last Saturday on WXTK.  The discussion circled around folks like Jen and I.  Those folks that are still in the accumulation stage of their financial lives, trying to determine – and reach – their retirement number in the hopes of participating in all that golf, sunshine, exercise, and especially those happy hours. 

Folks, this is a hard question, I get it. For those of you who think you have a good idea of what that number is, how confident are you? 

Get this, two-thirds of all U.S. workers said they are very or somewhat confident they’ll be able to live comfortably throughout retirement, according to a study by the Employee Benefit Research Institute. But oddly enough, only 42% have done any retirement calculations, and fewer than 1 in 3 workers has tried to figure out how much money they may need for future medical expenses.

On average, Americans surveyed believe that they need roughly $1.7 million saved up to retire, according to a recent survey fromCharles Schwab, which looked at 1,000 participants in 401(k) plans nationwide.

For some of us, that may seem high, but it’s reality for many people in today’s retirement climate, especially when future needs are compared to current salaries. When I first started in this business, the school of thought was that a retiree could get by if he or she had saved enough to generate 70% of the income earned during his or her working years.  In today’s environment, many financial professionals believe that we need to save enough to generate 100% or more of our current income, and I agree. For the most part, this shift can be attributed to a floundering Social Security System and rapidly increasing health care costs. And of course, COVID-19 has added to the woes with job losses, market volatility and overall financial uncertainty.

So, here’s the problem that Americans are facing. According to a 2020 TD Ameritrade report, nearly two-thirds of 40-somethings have less than $100,000 in retirement savings and 28% of those in their sixties have less than $50,000.

Hmmm . . .those numbers don’t seem to predict a comfortable retirement.

You see, unlike with previous generations who had employer-funded pensions to rely on, most retirees today don’t have that luxury unless you’re one of the lucky few or unless you work for the Federal or State governments. This means that current and future generations must instead sock away most or all of the savings themselves.

Regardless of the exact figures, this leaves people significantly short of their big orange numbers.  But remember, the most valuable asset we have in the accumulation stage of our financial lifetime is time. The earlier we start, the more successful we are in the long run. The obvious reason for this is that by saving sooner, there are more monthly periods to save, so the percentage of each monthly budget needed to put toward retirement is lower.

But the other compelling reason to start saving sooner rather than later, is compounding interest.  Compound interest presents to us the opportunity to make money on money.  Essentially, the more time we have, the more time we give our money to grow.  Heck, even Albert Einstein chimed in on this one.  He said, “Compound interest is the eighth wonder of the world.  He who understands it, earns it . . . he who doesn’t . . . pays it.”  And he was a pretty smart guy.
Beyond simply starting early, there are a few other things that we can do to reach our target number even sooner; these things are especially helpful for those who are just at the beginning of their careers.
One of the most important things to do is to create a budget.  A budget is one of the most important building blocks to any financial system. Outline monthly expenses, define discretionary income, and plan to put a specific amount towards retirement every month.  And always pay yourself first! When your salary goes up or expenses go down, your retirement contributions should go up.

Once you start putting that money away, resist the temptation to borrow against it.  If you borrow against your savings, you miss out on the opportunity for that cash to earn compound interest and you could lose the chance to capture valuable market gains.
Another opportunity for those in the accumulation stage is to take advantage of any employer-sponsored retirement plan as early, as often, and as fully as possible.  If your company offers a plan, contributing to it is a great way to get started.  If the plan offers a company match, that’s “free” money, and “free” is the best four-letter word I know!  You should try to contribute at a minimum the full amount the company will match. If your company does not offer a specific plan for employees, do not let yourself off of the hook here. Take the initiative to open and to max out a Traditional IRA or a Roth IRA.  
It’s also important to remember that financial planning is not a “set it and forget it” strategy. Do not create your budget and then stick your head in the sand for the next few decades. As your financial situation changes, as the market changes, as your goals change, you should be updating your financial plan. Make sure to work with a retirement specialist to make ensure your strategy is on track to meet your defined goals.

Lastly, I would be remiss to lay out a strategy to success without addressing how to avoid failure. The bedrock foundation of failure is procrastination. We’ve all done it, putting things off, delaying action. Nope, not today. Anticipation is the ultimate power. Remember this: leaders anticipate. Lead yourself into a solid retirement.

So folks, what’s your number?

Be vigilant and stay alert, because you deserve more.  Have a great week.

 Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, Mansfield & Southlake, TX. Jeff can be reached at

 This article is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Market data and other cited or linked-to content in this article is based on generally-available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A and applicable Form ADV 2Bs. Please contact us to request a free copy via .pdf or hardcopy.  Insurance instruments offered through CutterInsure, Inc.