Getting Started with Retirement Planning

The most important takeaway in retirement planning is to get started. At MSA, we can help you identify ways that you might consider saving for your future and be with you every step of the way to help you to be successful.

It’s never too early to start. Plus, if you wait until it is too late and you have not saved enough for the retirement you want, you may find that some financial decisions are out of your control.

Here are some educational ideas on how to get started.

Sticking to Your Plan
The message is to make sure that you are committed to saving for your future, and YOUR is the operative word. Many people feel that they just don’t have enough money to save and that it won’t make a difference. In the long run, it probably will. The other thing that could happen is that life comes along, and all of a sudden, the money you had set aside for savings needs to be spent on something else. Think of savings like a diet. We sometimes listen to that ice cream sundae calling out to us, but the next day we are back at the gym and the salad bar. It’s the same thing with savings. You may deviate from your plan but just get back to it the next month.

Design Your Goals
You get to design the future life you think you want. Things may change as time goes on, but this step can inspire you and get you excited about what it might take to reach your goals.

As you try to determine what your goals are, think about the following:

• Where do you want to live?
• Do you plan to be alone or with a partner?
• Is it important for you to live near friends or family?
• Do you plan to travel?
• Do you want to rent or buy a home? A car?
• Will you work during retirement?

The fun part is making your own list.

Your Retirement Budget
Each one of the goals on your list will carry a cost. Figure them out on an annual basis. A home, for instance, may continue to have costs whether you have a mortgage or not; for example, you may plan to have the mortgage paid off by the time you retire, so only things like routine appliance replacements, taxes, insurance and repairs or maintenance will have to be considered. Do you need a car? What are the costs of the car and maintenance? Do you want to travel? Again, work out your best guess for an annual budget for that. Figure out the basics: food, clothes, utilities and phone, entertainment, medical insurance, other medical expenses, etc., and consider how inflation will probably make those costs rise over time.

One thing that many people forget when they are creating a retirement budget is the impact of taxes. For accurate budgeting, you’ll want to estimate how much you will pay in taxes during retirement.

Emergency Fund
We know that life can throw us curveballs, so make sure that you build some extra money in for those surprises. The emergency fund can help you stick to your retirement plan because you can use that first before tapping into other money.

Debt
When you approach retirement, it’s ideal not to carry debt because of the impact on your budget. If you still have debt that you are paying off, build that repayment into your budget.

Insurance
Protecting people or things that you care about with insurance generally makes sense for most people. Over time, your insurance needs may change, so reviewing policies each year is a good practice.

Life insurance is very important when your kids are young and need to be covered if something happens to you, but you may also want to have life insurance during your retirement years to protect a spouse or other loved ones.

It’s also important to look at long-term disability insurance. People are more likely to suffer longer-term problems and illnesses than sudden death. The costs of care – in-home or in a facility – can blow apart any good retirement plan.

Generally, the younger you are, the lower the premiums for things like life, disability or long-term care insurance. Other factors are often considered, and a medical exam is likely to be required in order to qualify for certain types of insurance.

Investing Education
As you learn more, consider how to set up an investment plan to reach your goals; you will want to monitor and make changes as needed over time. The more years you have, the more your interest may compound. Compound interest is an exciting concept as you might see over time that the interest you’ve earned starts earning interest itself, and so on.

Also, the more years you have to invest, you might be able to take more risks and hopefully get greater returns. You will want to think about your own risk tolerance. Unless you can afford to lose the money, it’s probably never good to bet-the-farm on a really risky investment. Remember, you want the money to be there when you want and need it. Consider setting up a plan that matches your goals and avoid watching the market every day. It will drive you nuts. Review your performance every quarter.

If your company offers a 401(k) or 403(b), consider signing up and adjusting your budget to contribute the maximum amount you can afford if it makes sense. Also, you may want to consider setting up a Roth IRA if you are eligible and it makes sense for your financial situation. You can have both a 401(k) or a 403(b) and an IRA, depending upon your individual situation. Get help from a tax expert if you’re not sure which combination of account types might work best for you.

Social Security
Your paycheck deductions generally include Social Security savings. Social Security can be a great supplement but is often not a great source of total retirement income. You can get an estimate of your benefit amount at ssa.gov/benefits/retirement/estimator.html.

Keep Going
You may have trouble meeting your savings goals each month. That is okay, because you probably have short- and medium-term goals to cover, as well. The biggest takeaway is for you to be consistent and consider building your retirement savings as part of your overall budgeting and savings plan. If you still have questions, talk to a Money Coach today.

Information provided in this article is for informational purposes only and is not intended to offer specific personalized investment, financial planning, tax, legal or accounting advice. We recommend that you consult an attorney, tax advisor or accountant regarding your unique circumstances.

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