3 Key Financial Habits That Set Wealthy Retirees Apart

The wealthy may seem to have it all figured out, but their success is the result of years of discipline and sound financial choices. Nothing happens overnight, and a careful, mindful approach is the most important part of the process. If you aspire to build wealth like them, you can do so by following in their footsteps. While everyone’s situation is unique, certain habits that helped the wealthy can also work for you.

A financial advisor can help you understand and adopt the habits of financially successful people. This article will also highlight three key habits that set the wealthy apart which you can easily follow.

Below are 3 essential financial habits that set wealthy retirees apart:

1. Saving more than the traditional recommendations

One of the most noteworthy habits of wealthy people is that they save much more than the usual recommendations. While many financial experts advise saving 10% to 15% of your gross income, these individuals consistently aim to save a higher percentage of their earnings. Most of them often save 25% or more of their income annually. While this may seem ambitious, the approach goes beyond simply building wealth. It also cultivates financial discipline and gives retirees a sense of control over their future.

Having a high savings rate can provide more than just a financial safety net. It offers the freedom to explore opportunities that others might hesitate to consider. With a larger pool of savings, wealthy retirees are often more financially confident, which allows them to pursue high-risk, high-return investments, which have the potential to boost their wealth further. These individuals understand that relying solely on their income can be limiting, especially as they approach retirement. Their savings ensure that they can meet their financial needs regardless of the ups and downs of life. They not only sustain their lifestyle but also provide self-reliance and peace of mind. Moreover, it provides them with much-needed financial flexibility in later years. With a substantial savings cushion, these individuals do not have to depend on others, such as their children or grandchildren, or feel constrained by financial limitations. They can fund their healthcare, travel the world, and live a dignified life.

However, it is important to note that having this mindset requires a lifelong commitment. It does not just happen overnight. One has to prioritize saving no matter the stage of life they are in or their income level. Irrespective of the level of income one earns, wealthy retirees maintain their discipline and set aside a significant portion for the future consistently year after year.

What can you do?

You, too, can save more than the recommended rate. All you need is a plan and commitment. What percentage of my income should you save for retirement? Well, you can start with at least 10% of your income to build the habit of saving. However, you need to gradually increase this percentage if you wish to be financially stable like the wealthy. Saving the same percentage year after year will help you build wealth, but it may not be enough to impact your net worth significantly. Instead, you need to raise your savings rate as you progress through life consistently. You can begin as early as possible, ideally from the moment you start earning. Each salary hike and bonus can be used to prioritize your future over immediate gratification. While it is tempting to reward yourself in the present, overindulgence can jeopardize your long-term financial security. Therefore, you must learn to strike a balance, and the steps below can help you stay on track:

  • Start small but steady: Begin by saving at least 10% of your income. This is a manageable goal and can be comfortably followed at any income level and age.
  • Increase your savings rate regularly: Make it a habit to boost your savings rate by 2 to 5% every year, depending on your lifestyle and financial goals.
  • Seek professional guidance: A financial advisor can help you identify the best strategies to maximize your savings. They can recommend the right savings instruments suited to your goals and risk tolerance and ensure that your money does not sit stagnant but grows over time.
  • Invest wisely: It is important to invest in options that have the potential to grow your wealth, such as mutual funds, stocks, or tax-advantaged retirement accounts like the 401(k) and the Individual Retirement Account (IRA).
  • Stay disciplined and consistent: You must actively resist the urge to dip into your savings unnecessarily. Your discipline can help you gain financial freedom in the long run.

2. Spending more mindfully and intelligently

Financial literacy and spending habits are two pillars of wealth-building for rich retirees. Wealthy retirees know that building wealth is not just about saving. It is also about spending wisely. They focus on how they use their money by adopting a mindful and strategic approach to ensure their spending aligns with their long-term goals. For them, saving is not merely about stockpiling wealth for the future, where they can spend it all. Instead, it is about creating a financial balance. A key aspect of this mindset is having a well-thought-out withdrawal rate to ensure their spending remains sustainable throughout their lifetime. For instance, a retiree with $2 million in savings might decide on a 4% annual withdrawal rate, which translates to $80,000 per year. This rate ensures they can cover their expenses comfortably while leaving room for their wealth to grow for their future use.

Poor financial habits, such as withdrawing money impulsively or without a clear purpose, can deplete savings faster than anticipated. Wealthy retirees avoid this by thoroughly analyzing their needs and maintaining discipline when accessing their funds. Mindless spending, even with substantial wealth, can be financially damaging. Instead, they evaluate their expenses carefully, create a realistic budget, and stick to it. They understand the consequences of poor financial habitslikeoverspending and take corrective action when necessary. For example, if one month’s expenses exceed their plan, they balance it out by cutting back in subsequent months.

Wealthy retirees also set a personal safe withdrawal rate. This rate takes into account factors such as their age, life expectancy, current wealth, and long-term goals. Additionally, they think beyond their own needs and also consider what they wish to leave behind. This is done by creating trusts, drafting wills, or donating to charitable causes, all balanced with a withdrawal strategy that is designed to preserve their legacy.

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What can you do?

Just like wealthy retirees, you can cultivate mindful spending habits that align with your financial goals. It is not enough to save with the idea of rewarding yourself at a milestone. For example, many people make the mistake of setting a target. Say you save $50,000 and then splurge it all on a luxury item as a reward the moment you reach this milestone. This impulsive spending can derail your progress and leave you further from your financial aspirations. To avoid this pitfall, you need to be smart about how you spend your money. Here’s how:

  • Establish a thoughtful withdrawal rate: Create a withdrawal plan that balances your current needs with your future goals. A well-calculated withdrawal rate ensures you are not overspending while still enjoying life. For example, if you plan to withdraw 3% to 4% of your savings annually, it should comfortably cover your essentials while allowing your wealth to grow.
  • Spend on assets, not liabilities: When you do spend your money, you must prioritize purchases that add long-term value to your financial portfolio, such as assets like real estate. Understand that liabilities, such as unnecessary luxury items often depreciate and drain resources.
  • Balance discretionary and non-discretionary spending: Differentiate between your needs and wants. It is important to allocate funds wisely to ensure that both categories are managed without jeopardizing your financial stability.
  • Use calculators to assess spending impact: Tools like retirement or expense calculators can provide clarity on how your spending affects your overall financial health. For instance, if you are considering a large purchase, a calculator can show you how it impacts your savings over time. This can help you make informed decisions and avoid impulsive buys.

3. Hiring the best of experts

One of the most helpful things wealthy people do is hire the right professionals to guide their financial decisions. They understand that building and preserving wealth is not about trial and error. Rather than relying on financial advice from peers or family members, they turn to experts who bring specialized knowledge and experience to the table. They recognize that hiring financial professionals is not just an expense but an investment in their financial future.

Wealthy retirees prioritize hiring financial advisors for recommendations on critical aspects such as investment planning, portfolio management, tax planning, and retirement savings. With their help, wealthy retirees can make informed decisions that align with their financial goals and risk tolerance. Beyond general financial advice, wealthy retirees may also seek the expertise of estate planners. Planning an estate helps them ensure that their wealth is distributed to their loved ones while minimizing taxes and legal complications. Estate planners help retirees create trusts and power of attorneys, designate beneficiaries and set up health directives to protect their assets for future generations.

Insurance experts are another essential part of their team. These professionals recommend policies that address their evolving needs, from health and life insurance to long-term care or liability coverage. Wealthy retirees also rely on tax planners to understand and abide by prevailing tax laws and use strategies to minimize their tax liability. This allows them to save more and use these savings for continued growth. In addition, wealthy retirees often work with lawyers to ensure their interests are protected, and their decisions are legally sound.

What can you do?

The best step you can take is to hire a financial advisor. Anyone, at any stage of life, can benefit from professional financial guidance. A financial advisor can help you streamline your finances and build a strong foundation. Instead of navigating through trial and error, you will receive expert advice according to your specific goals and circumstances. Financial advisors offer guidance on several key aspects, including:

  • They help you determine a safe withdrawal rate that ensures your funds last throughout your life while meeting your current needs.
  • Financial advisors can recommend a savings rate that aligns with your lifestyle and aspirations.
  • Based on your risk tolerance and financial objectives, they can guide you toward suitable investments.
  • A financial advisor can help you build and maintain financial security.

Insurance is another area where expert advice can make a significant difference. You can consult an insurance advisor to evaluate your life insurance, health insurance, or long-term care needs and ensure you buy the right policies to protect yourself and your loved ones from life’s uncertainties.

Beyond a financial advisor, you can also consider hiring an estate planner. Planning your estate ensures your assets are passed on to your heirs seamlessly. An estate planner can help you create wills, trusts, etc.

To conclude

Incorporating the habits of financially successful people can help you become successful as well. While not everything that works for them will work for you, integrating some of their strategies can improve your chances. At the same time, it is crucial to evaluate your own unique needs and make sure your financial habits align with your goals. These habits should serve you well in the long run. If you are unsure where to start or how to tailor these habits to your unique financial situation, consulting a financial advisor can make a big difference.

Use the free advisor match tool to get matched with seasoned financial advisors who can guide you on adopting the financial habits of the wealthy effectively. Answer a few simple questions and get matched with 2 to 3 vetted financial advisors based on your requirements.

For additional tips and recommendations on maximizing your retirement savings, visit Dash Investments or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. Additionally, each client receives comprehensive financial planning to ensure they are moving toward their financial goals. CEO & Chief Investment Officer Jonathan Dash has been covered in major business publications such as Barron’s, The Wall Street Journal, and The New York Times as a leader in the investment industry with a track record of creating value for his firm’s clients.

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