Planning for retirement is a lifelong process. The earlier you get started, the easier the transition will be and the more time you’ll have to enjoy it. However, it’s never too late to start planning for retirement. Though the process may seem complicated, a trusted advisor can make a world of difference. Our financial experts will gladly help you understand your options and successfully plan for the future.
Planning for Retirement
Every individual and their circumstances are unique. This means that what works for one won’t necessarily meet the needs of another. While only you know your specific goals and situation, there are some general best practices to keep in mind.
The average U.S. adult can expect to retire at age 64 and live to about 78 years of age. This leaves about 10-15 years to relax, travel, and enjoy a successful retirement. The more time you have until then, the less you’ll have to save each year to reach your goal. Those who begin planning early better position themselves for long-term growth.
A successful retirement depends on a variety of factors. The first to consider is your planned retirement age. When exactly do you want to retire, and can you afford it? While you can start collecting Social Security benefits early at age 62, the full retirement age for those born after 1960 is 67 years old. If you choose to claim benefits early, you’ll suffer a financial penalty. On the flip side, you can choose to delay benefits until age 70 to claim an increased monthly payout.
Another important consideration is healthcare costs. Your medical needs are likely to remain during retirement, and the earliest age to get started with Medicare is 65 years old. Until then, plan to continue covering the cost of insurance, hospital visits, and prescription drugs yourself. Those with chronic health conditions can expect to spend a larger part of their retirement income on healthcare costs each year.
With these aspects in mind, the next step is to assess your total annual living expenses. This will give you a good baseline when saving, investing, and planning for retirement. Then, multiply annual expenses by years of retirement for a rough estimate of what you’ll need.
Saving and Investing
Planning for retirement comes down to living expenses. We recommend about 80% of pre-retirement income to support the same standard of living during retirement. Unfortunately, Social Security benefits are unlikely to cover more than 50% of your financial needs.
There’s no one-size-fits-all strategy when planning for retirement. However, it always involves some form of saving or investing, or both. The truth is these are quite different methods of retirement planning and one may be better for you than the other. Investing generally leads to greater returns over time, though it also involves greater risk. Saving may sometimes be safer, but then you also must contend with factors such as inflation.
Several types of plans exist to meet diverse retirement needs. There are various pension plans, individual retirement accounts (IRAs), and employer-sponsored plans. Pension are rare in the private sector, but employer-sponsored 401(k)s are common. If you’re unsure about your options, ask your employer if they offer any financial aid. Otherwise, IRAs are another great way to save, invest, and reduce taxes either now or in the future.
Planning for retirement on your own can be intimidating. That’s why we developed our Retirement Analyzer tool to help you create and monitor a custom financial plan with ease. Our trusted advisors can provide a clear snapshot of where you are, how much you have saved, and how to best spread out your retirement income. This easy-to-use software simplifies the planning process so you can retire with confidence and peace of mind.
If you’re ready to start planning for retirement, we encourage you to reach out for more information. Our financial experts will sit down with you to discuss your unique needs, goals, and timeline before offering their advice. We look forward to helping you prepare for the future today.