Plan, Prepare and Save for Your Retirement

By Linda Carter
Vice President, Retirement Planning
The Benefit Advocates
lcarter@benefitadvocates.net

Plan, Prepare and Save!

These are the steps to financial security in retirement. Today, the odds on enjoying a comfortable retirement are less than they were 15 or even five years ago. Of course you already know this, but the question is what are you doing about it? 

If you break down the steps involved in planning for your retirement, it’s not really that complicated. To get started, set a goal and work towards it. The following information can give you some ideas about how to get started. Remember, if you don’t know where you’re going, any road will take you there.

PLAN

Now’s the time to dream! What do you want for yourself in retirement and what will these items cost? As inflation continues to rise and health care costs continue to rise, you’ll need far more than your parents did to “exist comfortably” in retirement.” You must develop a plan and follow through. 

Financial planners recommend setting aside enough retirement income to equal 80 percent of your household income the year you retire. You may need to enlist the aid of a financial planner to determine this amount. You’ll also need to have some idea of the type of lifestyle you wish to maintain. Do you want to travel? Will you have paid off your home? 

These are the type of questions you must consider to estimate annual living expenses. If you put your ideas on paper, the odds are greater that you will achieve your goals. So your first step in preparation is to decide just what you want. Keep your goals simple, realistic and appropriate.

PREPARE

Stop accumulating debt and discipline yourself to living more for tomorrow than today. Begin by paying off credit card balances with high interest rates. If you have children, start early preparing for college tuition. Consider one of the College Savings Plans like the 529 College Savings Plan which allows your money to grow tax-free. You also owe no federal taxes on qualified higher education withdrawals made prior to 2011.

Whether you’re younger and just getting started or middle age it is never too late to develop a plan. However, the earlier you begin the bigger your retirement nestegg will be.

SAVE – SAVE – SAVE

If your employer has a contributory retirement plan such as a profit-sharing plan, 40l(k) or 403(b), join or increase your contributions. Take your next raise or bonus and put it toward retirement. Think in terms of “paying yourself first.” Fund your contributory retirement plan to the maximum because non-contributory Pension Plans, (those that are funded by the employer and in which the employee does not contribute) cannot be counted on for funding your retirement. This will be particularly true for the younger population just entering the workforce. If you already contribute the maximum allowed by your company plan, consider supplemental savings through a Roth IRA. 

Whichever method you choose, and you will likely need more than one method, SAVE until it hurts. The likelihood of declining earnings potential in your golden years is even more reason to save more now. Not knowing what your health or job situation will be in your later years, it’s wise to accumulate as much savings as you can, as early as possible. Remember you won’t miss what you can’t see. Your objective here is learning to live on less to accomplish your future retirement goals.

After you have established a retirement savings plan of action, check it periodically and make any appropriate adjustments. As your lifestyle changes, so may your investment goals.