We all dream of that ideal retirement. Setting your own schedule and doing what you want when you want. Work towards that goal requires financial stability — and these tips can help you set a strong foundation for working towards the future you’re dreaming of.
Set goals and make a plan
Retirement planning comes down to setting goals and knowing how you’ll work towards reaching them. Your goals may vary at different points in your life, and they won’t all relate directly to retirement. After all, whether you’re saving for a home down payment or a child’s college expenses, you’re pulling from the same pool of income you’ll use to save for retirement. You’ll have to make personal decisions to prioritize your savings plan.
For example, if you’re just starting your career, you may emphasize essentials like building a $1,000 emergency fund and paying down student debt. You should still consider starting a retirement account, even if you make smaller contributions — starting early is a major asset in accumulating interest and building your savings over time.
If you’re an empty nester looking to retire sooner rather than later, you might focus on retirement savings and having an emergency fund to cover a year’s worth of expenses. Then you might consider adjusting your life insurance coverage to account for independent children.
If you’re retiring next year, you might review your expected post-retirement income and expenses to identify financial gaps early so you can bridge them. Having a plan like this can help to give you peace of mind.
Review savings options
A trusted financial advisor can provide an objective review of your retirement plan to see if it will really get you to your goals. They can also help ensure you’re considering various savings vehicles based upon your needs and where you are on your financial journey.
For example, your first retirement savings focus might be maximizing contributions to a 401(k), particularly if your employer makes matching contributions — After that, you can consider adding other account types, like an IRA.
When it’s time to choose health insurance options, you might consider exploring health savings accounts. They have tax advantages, let you earn interest and let you carry unused funds into the future — right on into retirement. As you approach your 50s, you might investigate long-term care insurance to help safeguard your retirement savings from the steep costs of unexpected care.
You should also review your insurance coverage and your entire financial plan whenever you hit a life milestone or meet a goal, such as getting married, having kids or buying a home.
Don’t overlook the importance of an estate plan, either. A financial power of attorney, in particular, will let you rest easy knowing someone you trust will manage your finances — including your retirement accounts — if you can’t do it yourself.
Don’t focus on performance
Look for ways to increase retirement plan contributions. Perhaps you recently got a raise. This could allow you to contribute a higher percentage of your salary to your employer sponsored retirement plan. And if you’re 50 or older, make sure you take advantage of catch‐up contributions of an additional $7,500 per year if you are able. If you are already maxing out your contributions, perhaps consider opening an IRA for additional retirement savings.
If you are nearing retirement, talk with your financial advisor to see if you’re still on track to work towards reaching your retirement goals. If not, you may need to reconsider your retirement date, think about supplemental income sources or consider forgoing large expenses you’d been planning.
Last but not least, learn as much as you can about retirement accounts and other savings vehicles. Ask your financial advisor and retirement account managers if they have educational tools or resources, and look for reliable online information sources. The more you know, the more secure you’ll feel with the decisions you make — and the better positioned you’ll be.