How to Start a Retirement Plan

Greater Nevada Credit Union

Recent surveys found that Americans’ biggest financial fear is never being able to retire, and that 56% of Americans have less than $10,000 saved for retirement. Working for a company that doesn’t offer a retirement plan (such as a 401(k)), not being able to save money after the bills are paid, and/or simply procrastinating on getting started are commonly cited as reasons by those that are falling short or feeling financially insecure.

Are you living with uncertainty about having enough to enjoy retirement?  You don’t need to be wealthy or a financial wizard to build a retirement strategy; however, you need to spend a little time learning the basics, laying the groundwork, and then commit to a plan that will have you feeling way more optimistic about your financial future.

If you don’t know how or where to start, here are some ideas.

The first important step is to outline your goals of when and how you would like to retire.  Do want to live at or above the standard of living you are enjoying now?  Are you considering downsizing or relocating someday?  Experts often advise that you’ll need to replace at least 70% of your pre-retirement income for each year of your anticipated retirement in order to maintain your current quality of life.  That does not take into consideration health factors or major changes in your life circumstances.

People are living longer.  Outliving your savings is not something you want to be coping with in your golden years.

Once you have a general idea of WHEN you want to retire, you’ll need to estimate how much money you’ll need for a financially stable retirement.  Everyone is different, and life can take unexpected twists and turns before you actually start to draw from your retirement income.  Social Security benefits will not likely cover all of your financial needs.  The sooner you have your goals and saving strategy in place, the better.  Put time on your side.  The earlier you start investing toward your future, the less money you have to save every month, because your money will have time to grow. The difference between a person who starts a retirement plan in their 20's and one who starts in their 30's can amount to over a million (yes, million) dollars.

Once you have the money set aside, what’s the best way to invest it?

If your employer offers a tax-deferred 401(k) or 403(b) that allows you to make pre-tax contributions, your employer may also match your deposits up to a percentage, which will help your nest egg grow even faster.  These deductions grow tax-deferred and offer portability so you can roll it over to another retirement plan if you change jobs.

If you are unemployed or self-employed, you have the option to start your own Individual Retirement Account (IRA).  Rules and tax breaks vary by plan, so be sure to research your options thoroughly or speak with a financial professional so you understand the benefits and risks.  Greater Nevada has a team of financial advisors who are knowledgeable about retirement planning, investing, education funding, risk management for insurance needs and more.  They offer no-cost, no obligation consultations, and you can learn more here.

You may even opt to continue working in some capacity when you retire, whether it’s part-time as a consultant or contractor, or to run your own business and supplement your income stream later in life.  Be sure to weigh the pros and cons of each option.

Once you get your plan in motion, set a reminder to review your investments on an annual basis to ensure the strategy is in keeping with your goals.

Retirement Planning Resources

  1. Learn retirement basics with free online tools.
  2. Use a free retirement planning tool, like this one from AARP
  3. Use this calculator to estimate what you’ll need to retire.
  4. Learn the 15 big 401k questions to ask your employer.
  5. Learn the 5 debts you need to tackle before you retire.
  6. Learn why saving is just the start.
  7. Get a no-cost, no-obligation consultation with a financial advisor.
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