The time to begin planning for your financial future is now. So, when it comes to preparing for retirement, the earlier you start, the better.
Here are some steps to help you achieve your overall objectives:
- Review your current financial situation by assessing your income and assets versus your expenses and liabilities. Actually write it down and see the numbers. Are you positive or negative? Track this for multiple months. Are you naturally trending up?
- Determine a realistic amount to contribute regularly to your employer-sponsored qualified retirement plan, e.g., a 401(k) plan. Your goal needs to be to put the most money allowed into these plans. You also want to put the minimum amount to get the most money from your employer as fast as possible.
- In 2018, you can contribute up to $5,500 into a traditional Individual Retirement Account (IRA) or Roth IRA. If you are age 50 or older, you can contribute an additional $1,000. Depending on your participation in other qualified plans, contributions to a traditional IRA may be tax deductible. Earnings for both traditional and Roth IRAs have the potential to grow on a tax-deferred basis.
- Work toward reducing your debt. Pay off large bills as soon as possible. Curb your spending to avoid taking on any new debt that could carry over into retirement.
- Consult with a qualified professional about your life, health, and disability income insurance policies to determine the amount of coverage for your current and future needs. Insurance is something we all hate to pay for but feel grateful we have it, when we need it.
- Find out how much you can expect to receive in retirement from pension plans, veterans’ benefits, or Social Security. To get an estimate on your future Social Security benefits, visit www.socialsecurity.gov. You should factor these income streams into your retirement planning. The difference between these streams and your expenses needs to come from your nest egg.
- Analyze which expenses are likely to decrease after you retire (clothing, commuting, etc.) and which are likely to increase (medical, travel, etc.), and plan accordingly. Knowing these numbers will help you forecast your needs better. Once you have a handle on your annual expenses, you can back into how large your savings goal needs to be.
If you adhere to your checklist, you may see your savings increase as you get closer to reaching your retirement income goals. Remember, it is never too early to start planning for your future.
-Jared
