Plan Well to Retire Well
Did you know that January is Financial Wellness Month? For many of us, a planning for retirement is one of the most important financial wellness decisions we’ll make. We all dream of a secure, comfortable retirement, but many don’t start planning for it until its right around the corner. Regardless of where you are in your career, it’s never too early to look ahead and invest in your financial future.
What should I consider when planning for retirement?
There are a few main considerations when planning for retirement – what you want your retirement to look like (vision), how long you expect to be retired (timing), where you are now (taking stock), and your lifestyle.
- Retirement vision. Not everyone imagines the same retirement. Do you want to travel the world? Stay home and play with the grandkids? Move to a condo near the beach? None of these visions is right or wrong, but they do require different amounts of money. When thinking about your retirement, your own vision will be a key factor in how much income you’ll need.
- Taking stock. Where are you now? What are your assets and liabilities, how much do you have in savings and investments? Most Americans have far less saved than they would like – in fact, the median amount (an equal number of people had more or less than this number) in retirement savings in 2019 was $65,000. 25% of people have no retirement savings at all.
- Compare. Compare what you have now with what you’ll need over your retirement. Your life expectancy and the age you choose to retire influence how long your savings need to last, and your life expectancy might be longer than you think. For example, the Social Security Administration estimates that a woman turning 65 today can expect to live another 21.8 years, a man can expect to live another 19.2 years.
- Mind the gap. Think about how long your retirement will be and your retirement vision and try to determine how much money you’ll need to make that vision come true. Social Security will help, but it probably won’t fund everything. If there’s a gap, think about what you can do now to shrink it – do you need to spend less? Save more? Increase your income? A qualified financial planner can help.
- Lifestyle. Being healthy will make your retirement much happier. Start living a lifestyle that promotes good health now to help make your retirement all you want it to be. Exercise, eating right, and getting plenty of sleep can help you enjoy the best quality of life later.
When should I start saving for retirement?
The short answer is NOW. It’s never too early – or too late – to start planning for retirement. But the sooner you start, the more time your money has to grow. Most importantly, focus on what you can do, instead of what you haven’t done yet. Here are some ideas for retirement planning at every stage of your life:
- In your 20s. While you might not be earning a lot of money right now and your budget is probably tight, it’s actually one of the best times to start saving for retirement. The more you can set aside now, the longer it can work for you. Don’t cut yourself so short you have to start taking on debt but saving whatever you can now is a good head start. If your company has a 401k plan, that’s the perfect place to save. Your contributions are taken out of your paycheck before taxes and your earnings grow tax free until retirement. If your company has an employer match, your employer contributes to the account too – it’s almost like free money. No 401k? Look into a Roth IRA.
- In your 30s. Life (and finances) might be getting a little busier now. You might be earning more, but your expenses are probably going up too. Don’t stop saving. This is the time to increase the amount you’re putting into that 401k. An easy way to do that is to add it a little at a time – if you start at 2%, bump it up to 3%. You probably won’t even notice the difference. If you’ve maxed out your 401k contributions, start an IRA. Have kids? Start a college fund for them so you aren’t tempted to borrow from your retirement savings later.
- In your 40s. This is the time to get really serious. Pay down debt – a high credit card balance can cost thousands of dollars in interest over time. Put the maximum amount allowed into your 401k and fund an IRA if you haven’t already. This is a good time to find a trusted financial advisor to help.
- In your 50s. If you haven’t started saving for retirement or haven’t gotten very far, it’s not too late! Save as much as you can. Take advantage of your 401k and/or IRA, and use the “catch-up” contribution you’re eligible for now. Pay down debt. This is the time to focus on your retirement vision. Start creating the budget you’ll follow in retirement, and if necessary find where you can cut costs. If you haven’t gotten a financial advisor yet, this might be a good time.
- If retirement is on the horizon. The average retirement age in the U.S. is 64, but that doesn’t mean you have to retire then. Look at your retirement vision and financial picture and decide what makes the most sense for you – it might be earlier or later. For example, the minimum age to begin collecting Social Security is age 62, but you will receive a lower benefit. The longer you can afford to wait (up to age 70), the higher your benefit will be. A financial advisor can help you make these and other important decisions.
Your EAP can help
Planning for retirement is important. MHN’s financial services can help with personal financial counseling. The initial consultation is at no cost to you, and you can receive referrals to experts in your community.