Between weekend getaways, exotic vacations and all those spontaneous ice-cream purchases, it's no surprise that many of us feel challenged during the summer about keeping up with our retirement savings. There are so many other fun ways to spend our money, it's hard to stay focused on retirement. Still, despite the distractions that summer brings our retirement readiness plans, there are ways to get over those hurdles and stay on track.
Retirement Readiness Distractions
The temptation to spend "just because" is arguably at its highest in the summer months. In 2013, Americans' self-reported daily spending on things other than household bills averaged $103 in August, compared with $89 in July and $90 in May and June, according to a past Gallup report.1 Beyond summer vacations -- which Americans report spending more time planning each year than they do for their entire retirement, according to a Voya Financial online poll2 -- the costs for family summer activities can add up. For many parents, new expenses arise as parents look for ways to keep the kids occupied during summer vacation. Summer camps and childcare become new items to add to the monthly budget. Many times, however, this is something families overlook when mapping out their finances. As a result, savings, emergency reserves and retirement are often not being fed -- or worse, funds are tapped to afford these options for children while parents are working.
Summer Prices Sizzle
This year, the cost of many summer staples is higher than ever. Increasing food and gas prices directly affect budgets. It's important to keep an eye on how much money is going towards gas because we're all more apt to spend time on the road in the summer. Many budget-conscious travelers opt to drive rather than fly to summer vacation spots, but if gas prices are on an upswing, this could actually end up hurting you in the long run and put potential funds you'd been planning to set aside for retirement in jeopardy. Summer sales can also be tempting. From cars to outdoor grills, the urge to take advantage of a great deal can sometimes trick smart savers into becoming rogue spenders.
The Infamous Summer Slowdown
With schools out of session for the summer, it's prime time for families to vacation, which means many professionals are out of the office. This results in an overall "summer slowdown" for businesses (though those in tourist spots or summer-oriented areas are likely an exception). During a time when profit margins might be smaller, it is especially important not to dip into retirement funds. There can also be a gap in income for certain professions, including teachers, staff and facilities employees. Moreover, the stock market consistently has shown an overall slowdown as even Wall Street's traders take time off in the summer. The result often translates into smaller market gains for retirement portfolios during the summer months.
Smart Summer Saving (Not Spending) Solutions
So how can you address these summer savings pitfalls? First, given the fluctuating costs of summer staples, create wider margins within your budget buckets to accommodate price swings. If you find that you come in under budget, don't spend the cushion; save it or invest it. Look for strategic ways to limit spending, whether it's as simple as shifting your BBQ menu or having guests bring the beer to cut back on typical summer expenses.
If you are taking a weekend getaway or an extended trip, be sure to reassess your budget spending buckets to accommodate different spending priorities. For example, taking an extended trip might mean your entrainment budget for when you are back home is lowered. It's important to remember your spending limits while you are traveling. Though it may be tempting to dip into your savings to enjoy your time off, maintaining spending discipline will pay dividends in the long run.
Keep yourself honest about meeting your retirement readiness commitments by sitting down with your financial advisor. Your advisor can work with you to make allocations in your retirement investments to offset the typical summer slowdown in markets. It's also important not to overlap in your market strategy to combat a perceived slump, which is another reason to seek guidance from your advisor in summer months.
Think about your future summer and don't wait until you are near or in retirement to think about saving more. Recent research3 from the Voya Retirement Research Institute uncovered that more than one-half of retirees (52 percent) wish they started saving earlier in life, and nearly as many (43 percent) wish they had worked with a professional advisor sooner to better prepare them financially for retirement. Now is the time to consider spending one less evening dining out and grilling at home. Several little savings steps each summer -- over time -- can help prepare you to be economically and emotionally secure in retirement. And in hindsight, you will forget the expensive restaurant, but remember how smart you were to save those summer dollars.
The Bottom Line
Take the time to plan for summer's unique challenges to retirement savings and be disciplined about sticking to your regimen. Politician David Campbell is well known for his quote, "Discipline is remembering what you want." To make retirement a reality, take that sage advice. Remember that prioritizing retirement readiness is putting the extended vacation mode your retirement should ideally afford above your weekend or week-long vacation this summer.
About the author: Patrick Kennedy is senior vice president for the Retirement Solutions business at Voya Financial (formerly ING U.S.). This strategic business segment is focused on guiding Americans on their journey to greater retirement readiness through employer-sponsored, tax-deferred savings plans, as well as through holistic advice, financial planning and a broad range of retail product solutions for customers nearing or in their retirement.
1 Jones, J. M. (2013, August 13). Americans Spending More in Early August. Retrieved June 25, 2014, from Gallup.com
2 Voya Financial web poll of 1,100 consumers, June 2013
3 The Retirement Experience, Voya Financial Retirement Research Institute, January 2014