A penny saved...
It is never too early to plan for retirement. The landscape of the world of retirement accounts changes as you reach retirement age. Tax benefits begin to disappear. Tax implications become more plentiful. Retirement is the practical application of A penny saved is a penny earned.
Begin your road to retirement by exercising wise economic choices:
- Buy a house you can afford
- Spend wisely on cars
- Stay out of consumer debt
- Maintain a healthy credit report.
All of these choices build big retirement muscles.
Set your retirement goals.
Smart Goals
Calculate your current yearly expenses, including utilities, property taxes, car expenses and food budget. Do not include your mortgage interest payment, but do include your principal. Double the total to estimate how much income you will need to retire. Multiply that by the number of years you will be retired. This will be your target savings amount.
Talk to an investment counselor for help in gauging your risk tolerance, income security, dividend reinvestment and portfolio aggressiveness.
Never too early to begin.
I am 20. Is it too early to start saving?
You cannot start too early. The more you do now, the less you will need to do later.
Enroll in a 401(k) plan with your employer with matching contributions or begin a retirement account. Contribute the pre-tax maximum ($15,500) to your retirement. Learn to tailor your expenses to the money you bring home. You are learning to control money better.
401(k) is not enough. If you work thirty years contributing $15,500 per year, your nest egg before dividends will be $465,000. This may sound like a lot today, but when you retire, you will only have $31,000 per year to cover all of your expenses. How much did you need again?
Discuss with a financial adviser or investing consultant whether your needs will be best served with an individual retirement account (IRA), a mutual fund account or a stock portfolio or a combination.
Save it.
Do not spend tax refunds. You lived without that money all year. Instead of spending it recklessly, invest the entire refund into your retirement. You will be saving more money than your employer is investing in your 401(k).
Assess your risk tolerance. How much are you willing to gamble with your investments? Consider higher risk investments with larger dividends to grow your money faster. At this age, you will be more resilient to market losses than you will in a few decades.
I am 30. Should I change what I am doing?
Not 29 and holding.
You are beginning to build equity in your home. Your expenses have leveled, so your yearly raise will now be excess money each month. Instead of spending more lavishly, invest more.
Time has come to accelerate your contributions to your retirement accounts. Increase your pre-tax deductions to your 401(k) to the maximum allowable. Contribute the most allowable to your after-tax accounts.
Meet with your investment representative to discuss investing your increased contributions in diversified sectors. Your risk tolerance has reduced slightly over time. Rather than continuing to invest in higher risk ventures, put your additional money into moderate risk investments.
The Big 40
I am 40. Should I be worried?
Your retirement accounts should be at least two fifths of your target savings. If you are behind or foresee extra expenses like long term care, you need to take a two-pronged approach.
First, spend less. Eliminate all debt, and do not incur more. Live 100% within your means. Consider lifestyle changes such as fewer vacations, more efficient cars and lower entertainment costs. Sell extraneous possessions, like collections, art and jewelry. Trim or change hobby expenses.
Second, invest more. Upgrade your home for energy efficiency, which boosts your assets and reduces your expenses simultaneously. Invest all money you are saving from spending less. Consult with your financial adviser about reallocating your 401(k) funds for more rapid growth.
I am 50. I am home free, right?
Fifty is the new forty.
Not so fast. You can contribute more to your savings now than ever before. Consider downsizing your home. Even if your mortgage is not entirely paid off, you can eliminate your mortgage by moving to a smaller house. Smaller houses have smaller expenses. You can double your buying power.
Invest the profit from your house sale in your retirement accounts. Take advantage of the 401(k) “catch-up” provision. You can add an additional $5,000 per year to your 401(k). Before you are 60, you can add an additional $50,000 to your nest egg, before interest and dividends.
Time to get your investments you may still have out of the high risk group. Moderate to low risk investments will help you hold on to the money you have saved. Talk to your tax adviser about tax regulations on excess contributions.
I am 60. Time to get my money!
Retirement time.
When you turned 59 and a half, you were eligible to start withdrawing your money without a penalty. Hopefully, you did not. The biggest mistake you can make is taking out more than you need each year. The smart move is to use only dividends and interest for the first few years.
Your money needs have changed: No more mortgage, no more car note, lower home expenses. Talk to your investment counselor about scaling back your risk. You money does not need to grow as fast now.
Investigate the best way to access your money. Each year, consult your financial adviser about budgeting your withdrawals and consolidating accounts to maintain growth on the remaining investments and money.
Every age.
Regardless of your age, retirement should be in your budget. It is never too early to start saving for retirement.
~~~~~~~~~
What are your retirement plans? Do they involve the lottery? Have you gotten on the road to retirement? If you are retired, did you plan well enough?
lorrelee1970
/ January 24, 2012There you go ruining my progress. Just when I think I’ve caught up on your posts, you put up another.
In the back of my mind, my plan for retirement is waiting for someone to leave me a fortune. Honestly, I don’t work now, so it’s up to my hubby. Thankfully, he’s pretty good with money, but we need to buckle down and put a hit out on someone…..I mean save more.
Red
/ January 24, 2012I am telling you…greeting cards and my drunk friend. There is a fortune to be made.
lorrelee1970
/ January 24, 2012Don’t tempt me. I (honesty) really do want to get into greeting cards. I’ve wanted to do that on the side since college. I think it would be a burst of fun. I don’t want that to be what defines me, but I’d like to contribute.
Red
/ January 24, 2012Then, I say get to Googling how to get your foot in the door. Or figure out what it would take to get your own company started. Selling cards to stores is easier than you would imagine. Retail establishments are really tired of Hallmark and American Greetings. I know if left to my own devices, I would have barbecued the AG rep on principle alone.
lorrelee1970
/ January 24, 2012There are two companies that let you submit your work and if they like it they use it and make payment. I don’t know though. I’ll have to look into it more.
Red
/ January 24, 2012I always worry about those. Who is to say they do not tell you no and print the thing anyway? I had a publisher do that to me before. Can you imagine reading all of the cards to be sure it was not yours? Gad.
lorrelee1970
/ January 24, 2012That sucks. Yes, that is a major concern.
Phil
/ January 24, 2012I am a financial wonk executive type, and I approve of this post!
Well said, although it’s so damned clear and easy to understand, you might put a lot of financial planners out of business. Can you imagine those types wandering the streets pan-handling? The horror!
Red
/ January 24, 2012Just another set of trolls, eh? Finally getting to use some of the degrees I have for good instead of evil. 😉
Phil
/ January 24, 2012Good lord Red – are you telling me you’ve crossed over to the dark side of Finance? Using your powers for general good?
But… but… but… what about the Finance motto: “We make money the old fashioned way – we steal it” ???
And the secret handshake? 😀
Red
/ January 24, 2012I still remember the handshake, and the kickbacks…where do you think the computer set up came from? 😉 😉 Statistically speaking, the chances of anyone actually taking good advice is smaller than being audited. Whoops! Another secret out of the bag! ROFL!!
ansuyo
/ January 24, 2012Great advice, as usual 🙂
Red
/ January 24, 2012Thank you, dear. I just hope
someoneeveryone listens and tries at leastsomeall of it.Alexandra Heep
/ January 24, 2012This one I could not read, it’s depressing to think that I am 44 and don’t even know from day to day if I will have a roof over my head. Scares the hell out of me. Yes, I had the 401 K and savings at one time, but life had other plans. Many like me are in similar situations and it’s an abomination that hard work does not always reap the financial rewards it should.
Red
/ January 24, 2012I have come to realize only more recently the numbers of people who have nothing in reserve are frighteningly high. I have found it more among the disabled than virtually any other group. (Regardless of the state’s callousness, I place you in that group.) What I have discovered is the lack of medical coverage coupled with the inaffordability of necessary treatments have been equal opportunity destroyers of life savings across all social strata.
The utter lack of paying for what you get is far more disturbing, especially in our field. These companies failing to pay are the self-same who are reaping more than 500% on what we produce. Harkens to sweat shop, but few feel sympathy for those of us able to work in our PJs from home.
Alexandra Heep
/ January 24, 2012Pjs is right because I often lack the energy to even dress.
I am part of an online support group, but I had to stop reading in there tonight. The stories in there would have me weeping on no end. Our politicians have a lot to answer for. … and these are working people or people with working spouses.
Or, so whacked out on prescription drugs and being used as guinea pigs by doctors that they can’t type a coherent sentence. Many are on the brink of homelessness, having their power shut off in cold climates, etc. Many like me – no diagnosis, so they can’t apply. The ones who do apply, get turned down. I am a laid back person, but this gets my blood pressure up.
Red
/ January 24, 2012I certainly cannot blame you for that. My husband was denied with a terminal diagnosis. He died three months after the denial. The Senator I brought it to in complaint thought he was the wrong person for me to lodge my dissatisfaction, despite his having been on the administrative committee for the SSA. They are truly not competent to wipe their own arses.
Alexandra Heep
/ January 24, 2012What makes it worse that people on there give advice for those to go to the Salvation Army or United Way for help. I am not going to tell them that does not work … Maybe they will get help that I did not. However, others who aren’t in these situations think we can just line up for handouts, which, from my personal experience, is not true. Besides, most people with integrity and self respect do not want them in the first place. I will stop now, I am going off topic.
Red
/ January 24, 2012No worries. I know you are not a troll. No, most people who even would ask for a handout would not get it. I learned a very hard lesson years ago about the discriminatory and misleading practices of both of those agencies. When I posted Going Global I was hoping more people would speak about the charities they knew were limiting the amount of benefits they were dispensing.
As to those who offer ill-advised banter, that, my friend, is the subject of a post soon. Perhaps tomorrow, if I can pull off a little more research before noon.
Mike W
/ January 25, 2012As I just mentioned to Red over there on that ugly page they call Face Palm… er I mean facebook, I will retire the day before they buy my coffin. I have no retirement plans. We do have savings that are specifically for “retirement” And we’ll use them for sure. You can’t take it with you after all.
But I can’t imagine life without working or writing. Nope. Retirement is for people getting ready to die and I ain’t ready.
Red
/ January 25, 2012*Still giggling* I am so sure your wife appreciates you keeping busy and out of her hair. I think I shall spend the remainder of my retirement spending my children’s inheritance! *Giggling again*
Marc Phillippe Babineau
/ January 25, 2012Another great, thought provoking post, Red!
One factor many forget about when counseling retirement savings is that stuff happens. A lot of people get sick, lose their jobs and even their ability to work. Retirement then becomes more scary, because they know they will have much less to live on then.
The other factor I think needs to be taken into account is marriage. If yours fails, barring a prenuptial agreement (or a really good lawyer) there goes your retirement plans!
There’s always the lottery! (a better chance at riches than writing online?)
Red
/ January 25, 2012I live in a pre-nuptial world. For me, the accounts are mutually exclusive. I think you need to click on Emergency Funds in the tag cloud for more information!
Red.
prenin
/ January 25, 2012Because I am ill and unable to work I get credits towards my State pension, but the pension on my reaching the steadily increasing retirement age will NOT be enough to live on so I will be drawing Income Support Benefits when the day comes.
I am saving as much as I can manage, but I am only allowed £6,000 in savings before my benefits are cut so it does not pay to save.
All I can do is aim for the Big Buys like new furniture etc. and make my life as comfortable as possible until the inevitable occurs and I’m back treading water with no safe haven in sight.
Ironically the only way my life is going to improve is by winning the lottery – and I’m in a good state financially as I have no debts, unlike sooo many…
Love and hugs!
Prenin.
Red
/ January 25, 2012The elimination of debt is with what most struggle, so you truly are ahead of the game in that respect. I understand the balancing act very well. A similar scenario is here in the US.
{HUGZ}
Red.