Get An Early Start.
Ideally, you should start planning for your retirement income as soon you get your first job and reap the full benefits of compounding growth. Unfortunately, this is rarely the reality. If you’ve reached your 50’s and haven’t actively started planning for your retirement yet, don’t be deterred. Take action now and start making up for lost time. Everyone can save up to $19,500 into their 401k (or other retirement plan) at work. Those age 50 or better can use the “catch-up” contributions of $6,500 per year going into their retirement plan at work. To clarify, as long as your 50th birthday is December 31st or earlier, you can start contributing the extra $6,500 per year beginning in your first paycheck for January of the year you will have your 50th birthday. You do not have to wait until your 50th birthday to start the “catch-up” contributions. If you don’t’ have a retirement plan at work, you can contribute up to $6,000 of earnings into either a traditional IRA or a Roth IRA. Individual Retirement Arrangements (IRAs) also offer a “catch-up” amount of $1,000 for those that become age 50 during the calendar year.
Define Your Cash Flow.
If you haven’t already developed a budget for yourself, do it now. Determining your cash flow is your first step. Understanding your spending patterns will help you know how much income you’ll need once you’re in retirement.
Spend Less Than You Earn.
For some, this is a tough one, but still very necessary. The bottom line is you cannot expect to have money left over for retirement if you are currently spending more than you take in. Create a budget and stick to it.
Understand All Of Your Options.
Research, research, research. There are many different ways to save for retirement, and you’ll want to understand the pros and cons of the various strategies, insurance products and investment vehicles before deciding which to implement. Every choice has pro and con issues, determine what might be best for you.
Calculate The Risks.
It’s not a bad thing to invest in the stock market. However, you may not want to put all your eggs in that basket. Know the risks associated with investing and understand what your timeframe may be to recoup any losses before you commit to anything. The fact is, as you near retirement, you have a much shorter timeframe to recover from potential market downturns. Taking too much risk may not be right for you.
Create An Income Strategy.
A retirement strategy has two phases – the accumulation phase, in which you build assets to help fund your retirement, and the distribution phase, in which you use those assets to generate income in retirement. Don’t ignore Phase Two!
Have A Tax-Efficient Strategy.
You’ll want to make sure you’re taking advantage of all your legal options to help you lower your taxes as much as possible, both while saving for retirement and once you start taking retirement distributions. Working with both a financial professional and tax advisor can help you understand your options.
A retirement income plan that does not account for inflation could cause you to adjust your lifestyle in retirement. Make sure your retirement income plan addresses the impact of inflation on your retirement assets. Items will cost more in the future, so, take that into account within your plan.
Plan For A Long Life.
Given advances in medical care and a trend toward healthier lifestyles, it’s not uncommon for people to live another 20, 30 or even 40 years once they’ve retired. That’s great, but it also means your money needs to last longer, too.
Last But Not Least – Recognize You Might Want Help With All Of The Above.
Our business is understanding the important things to consider when planning for retirement, as well as the products and strategies that can help you pursue your goals. We want to help you live the life you dream of, and it all starts with having a strategy. We encourage you to seek out experienced, retirement focused, Certified Financial Planner™ professionals to build your strategy for a successful retirement!
This content is provided for informational purposes only and is not intended to serve as the basis for financial decisions. We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. Our firm is not permitted to offer tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Massey and Associates, Inc. are not affiliated companies. 921565 – 5/21
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