After 40 or 50 years of working, you could find yourself retired for another 20 or 30. To support yourself without a job for 20 or 30 years, you should be planning for retirement during your entire working life. However, your concerns and strategies for retirement will change as you age.
In Your 20’s. While you may just be getting started in your career, don’t squander the long time period before retirement that can help your retirement funds grow and compound. Saving even small amounts can help you accumulate significant sums by retirement age. For instance, if you invest $2,000 per year from age 25 to age 65 in a tax-deferred account earning 8% annually; you could potentially accumulate $518,113 by age 65. (This example is provided for illustrative purposes only and is not intended to project the performance of a specific investment vehicle.)
In Your 30’s. Typically, even though your income is rising, your expenses are also growing as you buy a home and start a family. However, don’t lose sight of retirement, since you still have significant time before retirement to help your funds grow. Look for ways to remain committed to saving, even as your expenses are increasing. For instance, whenever you receive a raise, put some of it into your 401(k) plan so you don’t get used to spending that money.
In Your 40’s. While you still have quite a while before retirement, it’s time to get serious about saving for retirement. If you haven’t saved much during your 20’s and 30’s, you need to really commit to saving for retirement. Make sure you are saving the maximum in your 401(k) plan and also look at contributing to an IRA.
In Your 50’s. Retirement is no longer that far away. It’s time to assess where you stand and whether your retirement plans are realistic.
Make sure you have an accurate assessment of how much money you’ll need in retirement and compare that to your estimated retirement income sources. If you are short, consider revising your plans. You may need to work longer, scale back your retirement plans, or save more.
Take advantage of catch-up contributions once you turn 50. In 2014, you can make a $5,500 catch-up contribution to your 401(k) plan, if permitted by the plan. An individual IRA allows a $ 5,500 contribution plus a $1,000 catch up contribution.
In Your 60’s and Beyond. Go through your expenses and expected retirement income sources one more time to make sure you haven’t forgotten anything. Determine when you can start drawing retirement benefits, such as Social Security, Medicare, and pension plans. Before you start withdrawals from your 401(k) plans and IRAs, consider all relevant factors. You don’t want to drain those funds too quickly.
Consider working on at least a part-time basis during the early years of your retirement. This will help keep you active while also supplementing your retirement savings. It is better to work now than to find out late in retirement, when your health may not permit you to work, that you have run out of retirement savings.
It’s never too early to start your retirement planning.
Reesa Manning is Vice President and Senior Financial Advisor at Integrated Wealth Management, specializing in retirement and income planning. For more information, call Reesa at (760) 834.7200, or [email protected].
The above is being provided for informational purposes only and should not be considered investment, tax or legal advice. The information is as of the date of this release, subject to change without notice and no reliance should be placed on such information when making any investment, tax or legal decisions. Integrated Wealth Management obtained the information provided herein from third party sources believed to be reliable, but it is not guaranteed. Form ADV contains important information about the advisory services, fees, business, and background and the experience of advisory personnel. This form is publicly available and may be viewed at http://www.adviserinfo.sec.gov
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