Retirement Advisor

Financial security in retirement doesn’t just happen …

It takes planning, commitment, and yes, money.

No Obligation 2nd Opinion

TOP 10 WAYS to Prepare for Retirement

Planning for retirement is a challenge for everyone. Again, the earlier you begin, the longer you will have to accumulate funds and capitalize on compound interest. A plan designed to meet specific retirement goals may be separate from or part of the investment building block.

Some people have given a great deal of thought to retirement, but others have not. Less than half (42%) of working Americans have made a retirement savings calculation, according to a recent Retirement Confidence Survey, and 70% have begun to save for retirement. Unfortunately, this means that 30% of workers have not yet begun saving. Most experts believe that regular, systematic savings is a habit that is best established early and maintained, not only throughout the working years, but into the early stages of retirement since people are living much longer. Today, many people spend as many years in retirement as they spent in the workforce.

  1. Start Saving, Keep Saving, and Stick to Your Goals   If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow (see the chart on the page 3). Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it’s never too early or too late to start saving.

2. Know Your Retirement Needs Retirement is expensive.  Experts estimate that you’ll need about 70 percent of your pre-retirement income—lower earners, 90 percent or more—to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead. You can start by reading these publications from the U.S. Department of Labor: Savings Fitness: A Guide to Your Money and Your Financial Future, and for those near retirement, Taking the Mystery out of Retirement Planning. (See the reference on page 2 of this article.)

3. Contribute to Your Employer’s Retirement Savings Plan  If your employer offers a retirement savings plan, such as a 401(k) plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money.

4. Learn about Your Employer’s Pension or Plan   If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. Find out if you will be entitled to benefits from your spouse’s plan. More information is available by reading the U.S. Department of Labor’s publication about protecting your pension: What You Should Know About Your Retirement Plan. (See the reference on page 2 of this article.)

5. Consider Basic Investment Principles   How you save can be as important as how much you save. Inflation and the types of investments you make play important roles in how much you’ll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions.

Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.

6. Don’t Touch Your Retirement Savings   If you withdraw your retirement savings now, you’ll lose principal and interest, and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

7. Ask Your Employer to Start a Plan   If your employer doesn’t offer a retirement plan, suggest that it start one. There are a number of retirement savings plan options available. Your employer may be able to set up a simplified plan that can help both you and your employer. For more information, read the publication that is available from the U.S. Department of Labor: Choosing a Retirement Solution for Your Small Business (See the reference on page 2 of this article.)

8. Put Your Money into an Individual Retirement Account   For 2016 and 2017, the maximum you can contribute to an Individual Retirement Account (IRA) is $5,500 ($6,500 if you’re age 50 or older). You can also start with much less. IRAs may also provide tax advantages. Visit the Internal Revenue Service’s website at www.irs.gov/retirement-plans, and click on Retirement Plans A-Z (listed under Retirement Topics). Then click on IRAs (listed under Topics for Retirement Plans on the left hand side of the page). When you open an IRA, you have two options—a Traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. (You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.) 

9. Find out about Your Social Security Benefits   Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration’s website at www.ssa.gov. For more information, visit their website or call 1-800- 772-1213.

10. Ask Questions   While these tips are meant to point you in the right direction, you’ll need more information. Read the publications from the U.S. Department of Labor listed in these tips.* Talk to your employer, your bank, your union, or a financial advisor. Ask questions and make sure you understand the answers. Get practical advice and act now.

__________________
*Reference for the publications listed in this article is: http://www.dol.gov/ebsa/publications/10_ways_to_prepare.html . They are listed at the end of the article by the U.S. Department of Labor and Employee Benefits Security Administration titled: Top 10 Ways to Prepare for Retirement.

Instead of going online, you can get any Employee Benefits Security Administration publication listed here by calling the U.S. Department of Labor at 1-866-444-3272. There is no charge. (Note that IRS Publications 590-A and 590-B about IRAs comes from the IRS, not EBSA.)

The Advantage of Starting Early
Start now! This chart shows what you would accumulate after 5, 15, 25, and 35 years if you saved $5,000 each year, and your money earned 7% annually.*

Start Saving, Keep Saving, and Stick to Your Goals   If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow (see the chart on the page 3). Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it’s never too early or too late to start saving.

Quick Facts

FACT 1: Fewer than half of Americans have calculated how much they need to save for retirement.

FACT 2: In 2012, 30 percent of those who had 401(k) coverage available didn’t participate.

FACT 3: The average American spends 20 years in retirement.

Putting money away for retirement is a habit we can all live with. Remember … saving matters!

______________________

*2016 and 2017 IRA Contribution and Deduction Limits can be found online at: http://www.irs.gov/Retirement-Plans/PlanParticipant,-Employee/Retirement-Topics-IRA-Contribution-Limits and http://www.irs.gov/Retirement-Plans/IRA-DeductionLimits.
Reference: This entire article, including the figures on the chart and the Quick Facts, is based upon the U.S. Department of Labor’s article titled: Top 10 Ways to Prepare for Retirement, written in 2007, and Revised in 2015. It can be found at: http://www.dol.gov/ebsa/publications/10_ways_to_prepare.html.

We offer a no-obligation “Second Opinion” meeting to review your current financial situation relative to your retirement, portfolio and estate planning goals.  We believe you will find this meeting beneficial, as we will discuss important planning strategies.

If you have questions or have need for advice with financial and investment issues, we are always happy to help you.

Most Popular

from our retirement advisors

Active Portfolio Management – How We Do It!

Active Portfolio Management – How We Do It!

Research Financial Strategies specializes in providing financial advice using a proprietary investment methodology that leverages technical analysis to identify and protect our clients against stock market risk. Research Financial Strategies provides our...

read more
Don’t Be Deceived By Mutual Funds

Don’t Be Deceived By Mutual Funds

Best Mutual Funds? Since the bull market run started 10 years ago, how many mutual funds would you guess outperformed the stock market? If you are thinking 500, 200 or even 20, you are very wrong.  In fact, not one single mutual fund has beaten the market...

read more

Should You Refinance a Home Mortgage for a Shorter Term?

Should You Refinance a Home Mortgage for a Shorter Term?As interest rates are still at all-time lows, you're probably thinking about refinancing your mortgage. When you refinance for a shorter term, you save on interest and pay off your home sooner. Sounds...

read more

Latest Thrift Savings Plan (TSP) Returns 2021

TSP fund performance figures for the G, F, C, S, I and L investment funds as calculated by the Thrift Savings Plan.   TSP FundsThere are currently 15 investment funds in the Thrift Savings Plan. Five are individual stock and bond funds, and the others are...

read more

January TSP Processing Schedule

January 17 — The financial markets will be closed on Monday, January 17, in observance of Martin Luther King Jr. Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 17) will be processed...

read more

TSP Thrift Savings Plan Returns 2021

Thrift Savings Plan (TSP) Summary of ReturnsBelow are the TSP fund performance figures for the G, F, C, S, I and L investment funds as calculated by the Thrift Savings Plan.   A description of each of the TSP funds here. 5 Thrift Savings Plan (TSP)...

read more