Many of us realize, almost too late, that planning for retirement is a life-long process: the earlier we create our retirement plans, the better our chances are to secure the income needed for the lifestyle we’re expecting during those Golden Years.
Of course, it takes more than just discipline, such as making monthly contributions every month into the company 401(k), or setting aside savings to accomplish future goals: college, vacations and emergency funds. What’s needed is a step-by-step ‘blueprint’ highlighting the important considerations as we advance through the years.
Your employer’s 401(k).
For some time now, employers have shifted their retirement offerings away from the traditional pension (defined benefit) plan to a defined contribution option, the 401(k). Such plans are usually sponsored by an employer who relies on a plan administrator, such as a Vanguard or Fidelity, to offer employees a select number of mutual funds.
Today, in keeping with defined contribution programs, the offering of ‘target-date’ mutual funds is becoming an appealing option for investors, as noted on the Investopedia website. Commonly referred to as ‘hybrid’ funds, this class of mutual funds…
“…automatically resets the asset mix of stocks, bonds and cash equivalents in its portfolio according to a selected time frame that is appropriate for a particular investor.”
With a 401(k) plan employees are always in control of their funds, and in some cases the employer will even match contributions on a percentage basis. Aside from the obvious tax benefit to employees that derive from reducing taxable income, companies receive a major tax break as well.
When it comes to matching funds, an example might be a 3% match by the employer: if you’re making $50,000 a year, the ‘match’ would total $1,500, which is money from the employer’s pocket direct into your 401(k).
Investing through the ‘ages.’
Young investors should start money away for retirement in their 20’s, so by the time they’re in their 50’s, their portfolio has more opportunity for growth.
In later years, it’s highly recommend to purchase a long-term care (LTC) insurance policy; this, to protect the assets in place from the costs of in-home care, or even the expense of a nursing home. In some instances, a blend of insurance along with the LTC policy is a smart choice.
Ideally, too, your retirement funds should receive a boost once you’ve whittled down, or eliminated, any outstanding debts. This could be car payments, credit cards and, of course, mortgage payments.
How do you plan to live in your ‘60s and beyond?
Remember that the backbone of your retirement funding will, for the most part, come from your Social Security benefits. Or, in other cases from federal or corporate pensions.
Obviously, the best mileage from your income streams at this point will depend on when you decide to start receiving your Social Security, and/or pension benefits; the former benefits increase by 8% a year until you begin drawing on it—-better than an annuity or CD’s, for sure!
A key resource during these years is an experienced financial advisor to help guide you in your investment decisions, and who can also help you with a withdrawal strategy to optimize your retirement savings
Most of all, and since the ’80’s are now referred to as the “new ’60s,” it is paramount that our health is given as much attention as our financial situation.
How will you ‘spend’ your retirement?
Today’s shift among retirees is not so much on how they “should spend their hard-earned money in retirement, but how they should spend their time.”
As such, the author of “The One Minute Manager,” Ken Blanchard, re-packages the traditional notion of retiring: “Refire! Don’t Retire,” and concentrate on the inner aspects of one’s psyche, such as developing new boundaries that test the “intellectual, physical and spiritual” vein during those later years.
Learn more about the importance of developing an estate plan, one that will help maximize your tax savings while protecting your financial assets. Contact us to start the conversation today.
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