Did you know that 78% of pro athletes go broke after only three years of retirement, 30% of lottery winners end up going bankrupt, and 90% of wealthy families lose their fortune by the third generation? There are plenty of stories about people coming into sudden wealth, only to be penniless in just a few years. How is this possible? 

Among other reasons, it comes down to what one past lottery winner stated: "If you’re not disciplined, you will go broke. I don’t care how much money you have" (CNBC). Or, as a famous but blunt expression puts it, "a fool and his money are quickly parted." 

Although few of us are going to receive a gigantic windfall from the lottery, a professional athlete contract, or a wealthy relative, if you have savings put away for retirement, similar principles apply. The key to having your retirement savings last? Building good financial habits long before you can access it. 

Strike a Balance Between Spending and Saving

How do you envision your retirement? Will you be travelling around the world, finally free from the constraints of a 9-5? Will you be spending as much time as possible with your grandchildren, excited to deepen your relationship with them? Or will you be nose deep in supplies for your favorite hobby, now that you have the time to really work on it? 

If you could never spend a single penny on those activities, how easy would it be to accomplish them? Not easy at all; in fact, more than likely it would be impossible. 

The key here is having balance. As a British columnist named Jonathan Clements commented, "Retirement is like a long vacation... The goal is to enjoy it the fullest, but not so fully that you run out of money." The point? Enjoy what money can buy, but stay within your means. If you maintain that balance all your life, you'll be able to do so into retirement as well. 

Prepare For the Unexpected With an Emergency Fund

Did you know that 44% of Americans don't have enough savings to cover a $1000 unexpected expense? An emergency fund, also called a rainy day fund, can be a lifesaver. This is true in any stage of life, but especially in retirement, when most people don't have the same money coming in as before. If you need help starting an emergency fund, this article can get you started. 

Another part of preparation is taking an honest look at how much you need to live off of — both now and in retirement. This can get complicated, and it may be beneficial to enlist the assistance of a financial professional.

Once you've crunched the numbers, you can build savings into your budget. Most financial professionals will advise clients to save first, spend second. It's as if your savings are another nonnegotiable bill to pay. X dollars goes toward electricity, Y dollars to groceries, and Z dollars to savings. This way, you spend what you have left over after saving, not the other way around. 

Of course, what's a budget if you don't stick to it? As the investing guru Warren Buffett once said, “Predicting rain doesn’t count. Building arks does.” If you plan ahead, stick to a budget, and save for a rainy day, you'll be better prepared to do the same when you retire. 

Weigh the Pros and Cons of Saving Versus Investing

Many people use the terms "saving" and "investing" interchangeably, but is there a difference? Yes; although they both involve putting away money for the future, they differ in the amount of risk involved. Each have their pros and cons; let's briefly look at both options. 

Saving. Saving comes in many forms: the classic "money under the mattress", a savings account at your local bank, Certificates of Deposit (CDs), or the high yield savings account (HYSA) that has been having a moment in the spotlight. All of them follow the same idea: you put money away for safe keeping. The benefit of this is that your money is relatively safe: it's not going to be affected by the rollercoaster ride of the stock market. However, since your money is protected from going down, it's also hindered from going up, or growing. 

Investing. Mutual funds, exchange-traded funds (ETFs), stocks, and bonds are a few of the many investment options out there. The general concept of investing is that you put your money into an investment with the hope of it growing exponentially through the years. That's the catch, though: investing is long-term, needing enough time to ride the highs and lows of the market. On top of this, it has a level of risk, meaning you could actually lose money instead of making it. 

So which is better? It depends on your own circumstances, risk tolerance, and time frame. Let's illustrate the difference this way: a savings account is like a full-grown apple tree; it's already mature, and you're getting a stable amount of apples from it. 

On the other hand, investments are like an orchard of saplings; you don't know what type of fruit trees they are, or even if they'll survive to full maturity. If they do, though, you'll have an orchard brimming with an abundance of fruit. 

Ask a Financial Professional 

"What would you do if you won the lottery?" This is a popular ice-breaker question, often answered by indulgent dreams, such as: "I'd travel around the world." "I'd buy a nice home." "I'd get a sports car." And yes, you'd likely have enough to cover that dream, but what if you had to make that money stretch for the rest of your life? The indulgence would probably only be able to last for a limited time before the funds ran out. 

I heard it said once that one benefit of having a financial professional is their ability to curb impulsive decisions and help their client stick with a plan. That's true whether you win the lottery or are trying to make sure you can have a long, comfortable retirement. 

It's like having a personal trainer. Without one, you could find plenty of articles and videos online about nutrition, workout plans, proper form, and more. You may have success with that. But the benefit of a personal trainer is that they know your personal circumstances, can build a tailored plan for you, and can keep you accountable. Sound familiar? 

A Long Retirement Ahead

Picture this: You've done the calculations, written an official letter of resignation, trained a replacement, and enjoyed a party thrown in your honor. The day you've been preparing for over the decades has finally come: the first morning of retirement. You may have mixed feelings, perhaps some excitement mingled with melancholy. Thankfully, you planned well for retirement, so one thing you don't need to deal with is figuring out how you're going to get by for the next two decades. You can thank your past self for that. 

That could be your future, if you build good financial habits now. Still needing more guidance? Eric is always happy to help.