Best Ten Ways to Prepare for Retirement Sponsored By:Aaron Steele

Financial stability in retirement does not simply happen. It requires planning, dedication, and, of course, money.

Facts 

  • Only 40% of Americans have estimated how much money theyll need to save for retirement.
  • In 2018, almost 30% of private-sector workers who had access to a defined contribution plan (like a 401(k) plan) didn’t participate.
  • The average American spends around twenty years in retirement.

We can all make a habit out of putting money aside for retirement.

Remember: Saving is Important!

  1.  Start saving, continue saving, and stick to your goals

Continue to save if youre already doing so, whether for retirement or another purpose. Youre aware that saving is a rewarding habit. If you aren't already saving, now is the time to start. Start small if necessary, and gradually raise the amount you save each month. The earlier you start saving, the longer your funds can grow (see the chart below). Make retirement saving a top priority. Create a strategy, adhere to it, and set goals. It can never be too soon or too late to start saving.

  1. Determine your retirement needs

Retirement is not cheap. Experts estimate that when you quit working, youll need 70 to 90 percent of your preretirement income to keep the same living standard. Take control of your financial situation. Preparation is the key to a secure retirement. Begin by obtaining Savings Fitness: A Guide to Your Money and Your Financial Future, as well as Taking the Mystery Out of Retirement Planning for those nearing retirement. (If you’re interested in a copy, see the back panel.)

  1. Contribute to the retirement savings plan offered by your employer

Sign up for and contribute as much as you can to any retirement savings plan offered by your employer (like a 401(k) plan). Not only you'll lower your taxes, but your employer may contribute more. Also, automated deductions will make it simple. Compound interest and tax deferrals make a significant impact on the amount you will amass over time. Learn more about your strategy. For example, how much would you have to contribute to receive the total employer contribution, and how long would you have to participate in the plan to receive that money.

  1. Inform yourself about your employer’s pension plan

If your employer offers a traditional pension plan, check whether you’re covered by it and understand how it operates. Request an individual benefit statement to estimate your benefit's value. Before changing jobs, find out what will happen to your pension benefit. Learn about any perks you may have from previous employment. Find out if youre eligible for benefits under your spouse's plan. If you want to learn more, check What You Should Know About Your Retirement Plan. (For further details, see the back panel.)

  1. Consider fundamental investment principles

The way you’re saving can be as important as the amount you’re saving. Inflation and the types of investments you make will significantly impact the amount of money you'll have saved when you retire. Understand how your funds or pension plan is invested. Learn about the investment options of your plan and ask questions. Put your funds in a variety of investments. Youre more likely to decrease risk and increase return by diversifying in this way. Your investment mix might change over time depending on a variety of factors like your age, aspirations, and financial situation. Financial stability and knowledge are strongly intertwined.

  1. Don’t tap into your retirement savings

If you take from your retirement funds now, you will lose principal and interest, and you may forfeit tax advantages or face withdrawal penalties. If you change employment, keep your savings invested in the current retirement plan. You can also roll them over to an IRA or your new employer's plan.

  1. Ask your employer to start a retirement plan

If your employer doesn’t have a retirement plan, recommend that it establish one. There are several retirement savings plans available. Your company may be able to devise a simplified plan that will benefit both you and your employer. Read Choosing a Retirement Solution for Your Small Business for more information. (For further details, see the back panel.)

  1. Contribute to an Individual Retirement Account (IRA)

The maximum contribution per year to an IRA is up to $6,000; and, if youre 50 or older, you can contribute even more. You can even begin with much less. IRAs also offer tax benefits. When you open an IRA, you can choose between a traditional IRA and a Roth IRA. Your contributions and withdrawals will be taxed differently depending on the plan you choose. Also, inflation and the type of IRA you select will determine the after-tax value of your withdrawal. IRAs are an easy and straightforward way to save. You can have it set up to automatically withdraw money from your checking or savings account and placed it into your IRA.

  1. Learn about your Social Security benefits

After retirement, Social Security retirement benefits replace around 40% of a median wage earner's income. You might be able to estimate your benefit by visiting the Social Security Administration's website and using the retirement estimator. Visit their website or contact 1-800-772-1213 for additional information.

  1. Ask Questions

While these suggestions are intended to guide you in the right direction, youll require more information. Check out our publications, which are listed on the back panel. Speak with your employer, bank, union, or financial consultant. Ask questions and make sure to understand the answers. Get practical advice and take action right away.

 

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