It’s always the right time to prepare for retirement. The planning you do today can help you achieve the lifestyle you want during your golden years. Use this guide to get retirement-ready, no matter your age.
Just getting started: 18 to 34 years old
When you’re just getting started, you have your entire working career to save for retirement. The key is the earlier you start saving, the more time your money can accumulate and grow. Your plan may change over time, but it’s a start in the right direction.
Learn to live within a budget. Knowing your income and expenses helps you keep debt low. If there’s money left over in your budget, save, don’t spend it. Use an online money management resource like Compass by LGFCU to track your spending more easily.
Enroll in your job’s retirement plan. Most employers offer either a 457 plan for government employees or a 401(k) plan. If your employer offers matching funds, make sure you contribute enough to qualify. It’s like getting free money! By contributing, you also reduce your taxable income and your money grows tax-free until it's withdrawn.
Contribute to an Individual Retirement Account (IRA). If your workplace doesn’t have a retirement plan, or you want to save even more, open an IRA. An IRA offers tax advantages like many workplace retirement plans. LGFCU’s Traditional, Roth and Simplified Employee Pension Plan (SEP) IRAs may fit your needs. If you’re not sure which one is right for you, view our IRA chart to get started. Some restrictions may apply, so consult with your tax advisor.
Your accumulation years: 35 to 54 years old
You’re likely earning more at this stage in your career, so review your plan and ask yourself, “Am I on track to meet my financial goals?” Now’s the time to step up your savings and really understand your strategy to meet your goals.
Review your mix of assets. You’ll want to make sure your asset mix matches your retirement timeline and comfort level. If you’re unsure, talk to your financial advisor to make sure you’ve invested properly for your goals, time horizon and risk tolerance. Review your plan each year and make changes, if necessary.
Contribute more toward your retirement accounts. As your earnings increase over time, be sure your retirement savings keep pace. Once you reach age 50, you are eligible to make catch-up contributions of up to $6,000 over and above normal limits for 401(k) and 457 plans, and up to $1,000 for IRAs. The IRS updates information on contribution levels annually.
If your assets are in several different retirement plans because you’ve changed jobs over the years, you may want to bring them together in a Rollover IRA. This may offer broader investment choices, more control and lower expenses than workplace retirement plans.
Nearing retirement: 55 years old and up
Now’s the time to get practical. Estimate what your total income will be when you want to retire. Will it be enough? There’s much to consider — your savings, retirement income streams such as Social Security, health care costs and life expectancy. Retire when you can afford to, consider working longer or taking a part-time job instead of going into full retirement.
When to sign up for Social Security benefits? If you wait until full retirement age, you’ll receive your full benefits. You can take benefits as early as age 62, but your benefits will be reduced at that age. It may make sense for you to take reduced benefits or it may not. Visit the Social Security Administration website for more information and talk to your advisor for recommendations.
Budget for health care expenses. Health care costs in retirement could be significant so consider purchasing a Medicare supplemental insurance plan to help cover out-of-pocket costs. Also, reach out to your insurance provider to learn if long-term care insurance is right for you.
Consider downsizing. You may be able to save money and generate more retirement income by selling or moving from your current home to a smaller home, apartment, or retirement community. You may have other reasons to downsize such as being closer to family or the desire for a different climate. Consider your options and make the choice that’s right for you.
Getting retirement ready is not a one-and-done deal. Make the right moves at any stage of life to put yourself in a great position for retirement. For additional guidance, visit your local branch to learn more about how our Financial Counseling Program can help members prepare for retirement.
The advice given is for informational purposes only. For additional guidance, speak to a financial advisor.