You’re never too young or too old to start planning for your retirement. The earlier you get started, the better, and as you age and that long-awaited day gets closer, you want to have as much put away and be as well prepared as possible. Following are some tips to help you plan for retirement at each stage of your adult life.
The ideal situation would be to start saving for retirement as soon as you start earning a paycheck. We all know, however, that this is much easier said than done when you are young and still trying to find your way in the world. There’s a good chance you’re simply living paycheck-to-paycheck and trying to make your rent. You may have a minimum-wage job and a mountain of student debt. Still, look for places to cut back. Be thrifty with your purchases and try to stash away as much as you can. Even a little per paycheck can add up to a great deal over time.
Try to get a job that offers a 401(k) program and take advantage of it, especially if your employer matches a portion of your contributions. If your employer does not offer a 401(k), consider a Roth IRA. If you can, try to make sure a portion of each paycheck is automatically deposited into the Roth IRA. If you can’t make this happen, deposit it manually each check or each month. The money will build over time, and distributions will be tax-free.
Also, when you’re young, you should spend some time learning as much about investing as you can, and becoming educated about your own investments. Assess what level of risk you’re comfortable with, and adjust your investments accordingly. Learn about your money, because the better you understand it, the more comfortable you’ll be in making decisions that affect it.
Beyond your retirement account, work on a separate savings account to build over the years and to have funds for emergencies that come up. You have your life ahead of you, and chances are you are going to face some obstacles from time to time. The more you have stashed away, the easier it will be to cope when life throws you curve-balls.
When you’ve entered the stage of your life that involves getting married and starting a family, reality will sink in that you have a lot more responsibilities than you did before. If you haven’t been frugal with your money so far, now is the time to start in earnest. Many of the rules for the “just starting out” stage apply here if you haven’t adhered to them so far. Make sure you have that retirement account going by this point, and stash away as much as possible for your savings and emergency fund as you pay your monthly bills and support your family.
This is a good time to contact your financial institution for an introduction to a financial planner. He or she can help you assess the current value of your investments and set up a plan to help them grow over time. (For more information, visit nsbank.com/financialplanning.)
Peak earning years
During your peak earning years, be sure to keep setting aside wages in an IRA, 401(k), etc. Now that you’re making the most money you’ve ever made in your career, you should be able to afford to put more away for your golden years. However, you may also be faced with the challenge of paying for a child’s college education or assisting aging parents. Don’t short-change your retirement account while juggling all these responsibilities. Your financial advisor can help you work out a plan that lets you focus on your retirement goals first, and then save for other needs as your budget allows.
There is often a mentality that makes one want to enjoy living (through spending) before one gets too old to enjoy life, but you should be smart about your future, especially if you have a family. Your peak earning years will be the most tempting time for making frivolous purchases, but these are the years when you can also make the biggest impact on your retirement, so it’s important to keep long-term goals in mind and stay the course.
As you approach retirement, chances are you’re giving it a lot of thought. You’ll need to consider how much income you’ll be receiving from Social Security, how much of that may be taxable, and what the minimum annual distribution(s) will be from your retirement funds. If you have not built an adequate retirement fund over your lifetime, you may need to look at income-generating opportunities during your retirement. Yes, that probably means working, even if only part-time. Your financial advisor can be a big help at this stage in helping you plan for a comfortable retirement.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.
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