Retirement Guys: Retirement essentialsWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
Ahh retirement, the point in your life where you get to sleep in, travel, spoil the grandkids and then send them home, and enjoy the fruits of your labor. It almost sounds utopian. And the perfect retirement could be just around the corner. So how do you get from where you are at today to that perfect retirement dream? Well, it starts by answering a few retirement essentials.
When should I start saving for retirement? The simple answer is immediately. The younger the better, but is it never too late. As a family starts out in life, we recommend an emergency account be set up before starting a retirement account. Work on saving about six months worth of income up in a liquid account. Doing so helps prevent having to cash in or take from retirement accounts which could be less liquid and subject to additional tax penalties.
For the person who works for a company that has a company match in the retirement account, we recommend making the maximum contribution to receive the full match. Since, the employer is putting money into the account along with the employee; it is essentially free money, so save away. Above and beyond the company match, consider adding to a tax-free account like a Roth IRA. Although no one knows what the tax rates will be in the future, it usually makes senses to have money in tax deferred and tax free buckets. No matter what the rates are in the future, the family can draw from different buckets based upon their situation.
If you don’t work for a company that offers a retirement plan or are self employed, save on your own. It takes more discipline than an easy payroll deduction. A mistake many people make is investing all their money back into their company or never getting around to saving for retirement on their own. Time goes by too fast to wait.
As business owners, who believe in reinvesting in our company, we still budget in our monthly expenses for retirement savings.
How much do I need for retirement? That is the million-dollar question. We were recently at a financial conference where calculators were given to attendees, who were asked the same question, to figure out the amount needed. It was amazing to see the difference of opinions.
We would suggest all investors do the same thing. Figure out that number and use that as a goal. Work to eliminate the risks that could erode savings such as a market downturn or an unexpected health care crisis. A general rule of thumb is to use a 3 to 6 percent withdrawal rate when it comes to looking at what the personal savings will provide in retirement time.
While $250,000 may seem like a lot of money, but remember your retirement has to last the rest of your life.
What if I can’t save enough money? Waiting to save until tomorrow is always an excuse. Everyone, including us, could come up with current needs that could take away from saving for the future. At the end of the day, investors need to ask themselves if it is worth it to spend the money today and pay for it in the future?
Since tomorrow often seems so far off, many choose to focus on spending the money today this could be a mistake. Commit to a fixed amount each paycheck and increase the savings rate when you get a pay raise in the future.
How can I reduce the amount I’ll need in retirement? Bottom line, eliminate debt. We meet with retirees every day. The common theme among successful retirees we see is they have their debts paid off. One of the best ways a family can be in control of their financial future is to pay off and eliminate their debts. Being debt free is powerful.
In the next few weeks, we’ll answer the essential questions the average family needs to know to not only survive, but thrive in retirement.
In the meantime, we welcome your questions. Tell us what you think or let us know what is on your mind. We love answering questions from our readers. It is your retirement, you deserve victory. So ask away.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc nor its representatives provide tax advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550.