Many of us know that retirement planning is important, and the basic concept of it seems pretty simple. When it comes down to getting serious about it, retirement planning can become overwhelming. Most Americans between the ages of 40 and 60 have less than $100,000 set aside for their golden years as reported by a TD Ameritrade Survey.
With the right knowledge and planning, you can set yourself up for a comfortable retirement. Here are some good things to know when it comes to retirement planning.
Start Saving for Retirement Early
If you just started a new job or have been in the workforce for a few years, it is wise to look into the retirement plans offered by your employer. Look into items like a 401(k) or a traditional Roth, a 403(b), a 457(b), or a pension.
Sign up for a retirement plan as soon as you are eligible or able. The sooner that these plans are utilized the more you will be able to set aside. Starting as soon as possible means more time to put money away as well as more interest and benefits earned over a longer period of time.
Find the Right Type of Retirement Account
Many jobs offer more than one retirement account, some offer only one, while others may not offer any.
If you do not have the opportunity to join a retirement program through work, an individual retirement account (IRA) is a good option to consider. They are even a great idea if your job does offer a plan.
The main difference between an IRA and a 401(k) is how much you can contribute to your account if it is sponsored through an employer. For example and IRA contribution is capped at $6,000 a year as of 2020/2021 and $7000 per year if you are over 50. A person is allowed multiple IRAs but only able to contribute the maximum across all accounts. A 401(k) is maxed at $19,500 or $26,000 for those over 50.
Different accounts offer different benefits and hold different rules.
Have a Retirement Goal
Expenses during retirement may not be the same as when you are in the workforce. This doesn’t mean there will not be expenses. It is projected that a person should expect to need between 70 and 90% of their current income to take care of themselves during retirement years.
There are many varying factors that can change this. Some of these factors can include downsizing a home payment or selling a car to get rid of payments and insurance. It is a smart idea to plan now for what you will need and hope to have later. This will help you to save more accordingly.
Don’t Forget About Social Security
Social Security is a monthly payment that is like a paycheck based on your lifetime earnings before retirement. On average retirees receive $1,503 in monthly social security payments. If someone finds this to be enough to live off of they may not save much if at all for retirement. This is the current benefit payout, though it could be much less in the future. It is a good idea to save for retirement like you are not expecting to receive a Social Security payout to help ensure all your needs are met.
Check Your Savings Account Every Year
Retirement plans are fairly low-maintenance, but they do still need some attention. It is good to look at them at least annually. Check to see if you are maxing out contributions and if your employer is continuing to match them.
Some plans will offer the opportunity to increase contributions by 1% a year. Make sure you are on track with the goal amount set for your planned age of retirement. You may need to rebalance your retirement contributions so keep an eye on them. It is always good to pay more attention to this account when you are younger and have less fiscal responsibility. This also gives you time to recover from investment avenues that take a downturn like the stock market. Investing in things later may mean recovering from them later if they take a bad turn and may result in needing to push retirement back.
Make Planning for Your Retirement a Priority
There are so many things in life that demand attention and money resulting in retirement not being at the top of the list. Retirement planning is important and should be on the top of every adult’s list. Even if you just contribute the minimum early on it will benefit you later in life.
Try not to take out loans against your 401(k) unless absolutely necessary. To avoid not paying into a retirement plan at all consider auto contributions or add a reminder to your monthly planner.
Having a plan for the future is a great thing and beginning to save for that plan as soon as possible is even better. For more information on available retirement savings plans in Vancouver please contact us at any time.