Ready to retire? More to consider before you make the move

Scott Adams

Scott Adams

As we shared in Retirement Planning Part 1 – Taking Control of Your Finances, retirement planning is the process of determining your retirement income along with the actions and decisions necessary to achieve them. After you have the basic knowledge of understanding, controlling and maximizing your finances, it is time to take a look at the specifics, from mapping out when you can retire to reviewing your options for retirement accounts and investments.

Before diving into the actual process of retirement planning, we wanted to reiterate some of the most important tips from Part 1:

Understand your finances, including how much you have coming in, where your money is going, and how your spending habits are affecting your financial potential.

Have a budget and stick to it so that every dollar has a purpose.

Have a plan to put your money to work, whether that is through normal savings, retirements or investments.

And last, but certainly not least, have an emergency savings of at least $1,000 and do not pull from your 401k if at all possible. If you feel secure in your current financial situation, let’s discuss next steps with some questions you may be asking yourself.

When can I retire?

The answer to this question comes from when you wother to retire, what you hope to accomplish after retirement, and when you will have enough money saved up to replace the income you currently receive from working. On top of being able to afford your essential living expenses, you also need to have enough funds on hand to be able to live your life to the fullest after leaving the workforce.

Here are some questions you should consider when planning your retirement timeline:

How much do I need monthly to pay my bills?

Do I have any major life expenses on the horizon?

How much debt am I carrying with me?

Will I qualify for Social Security?

What do I wish to do in retirement?

There is obviously quite a bit to think about when considering retirement. We would suggest meeting with a wealth adviser to gain insights from a professional and chat through your situation. In the meantime, check out our library of retirement calculators to see how your current retirement plan is setting you up for the long haul.

The best retirement plan for me?

On top of determining how much you need to save for retirement, you also have to decide where to save those funds. Unfortunately, retirement plans aren’t one-size-fits-all and depending on your employment situation, there are a lot of different options to consider. The two most common options are:

401(k)s or other employer-sponsored plans

These accounts are typically the easiest to set up and maintain as employers offer an automatic payroll deduction for deposits into the retirement account, leaving all of the other work to be done on the back-end by the retirement plan administrator. Your employer may offer to match a portion of your contribution up to a certain percentage – and you never want to pass up on free money.

Individual retirement account (IRA)

If your employer doesn’t offer a retirement plan, your next best option would be establishing an IRA. These accounts put you in charge, allowing you to choose the type of IRA as well as the institution it’s financed through.

Compared to workplace retirement plans, an IRA provides a much wider range of investment options. You can also decide how and when you get a tax break by choosing between a Roth IRA or Traditional IRA

If you are self-employed or an owner of a small business, there are options for you as well. With SEP IRAs, solo 401(k)s, and non-qualified annuities, we suggest talking through these options with a financial adviser.

How do I know what to invest?

Another great way to save for retirement is investing. This is a great question and something that should absolutely be discussed with a trusted wealth adviser. Determining the right investments for your specific situation depends on how long you have until you need a return on the funds and how comfortable you are with taking a risk.

The general rule of thumb is to invest more aggressively in stock-based investments when you’re young, as you have more time for your money to weather market fluctuations. From there, you can slowly convert to more conservative options as you inch closer to retirement.

Let’s Talk Money is powered by Community America Credit Union and this week’s feature comes from wealth adviser Scott Adams. Saving and investing for retirement is an evolving journey.


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