Building a Strong Financial Future Starts Early

What do you think when you hear the word retirement? It means so many things to different people. Some may think of traveling while others may want to take new classes or spend more time at home. Maybe you want to spend time with the grandkids or do some remodeling of your house. Whatever retirement is to you, one thing is for sure; you can’t wait until the day you say goodbye to your job to start planning.  Every financial planner will tell you the same thing, start early.

 

Types of Retirement

Many of us have an idea in our heads of what retirement looks like. Here are a couple examples of the most common types of retirement you might consider.

• Traditional retirement: Traditional retirement means you’ve completely left the workforce for good. You’re able to dedicate that time to the activities you choose. Your retirement savings must last you the rest of your life.
• Semi-retirement: Semi-retirement means that you may still be working part-time in your retirement years. This is a good option if you enjoy your work and want an opportunity to get out of the house. It also allows you to continue generating income, putting less stress on your savings.

Financial security in retirement doesn’t just happen. It takes planning, commitment and money. About half of Americans have calculated how much they think they need to save for retirement. In 2022, more than a quarter of those in private industry with access to a savings plan, such as a 401(k), did not take advantage of this opportunity.

 

10 Tips to Maximize Your Retirement

Putting money away for retirement is a habit everyone should take seriously. Consider the following tips to help with your planning.

1.) Start saving, keep saving, and stick to your goals.

If you are already saving, whether for retirement or another goal, keep saving. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make saving for retirement a priority. Devise a plan and set goals.

 

2.) Know your retirement needs.

Retirement is expensive. Experts estimate that you will need 70 to 90% of your preretirement income to maintain your standard of living when you stop working. The key to a secure retirement is to plan ahead.

 

3.) Contribute to your employer’s retirement savings plan.

If your employer offers a retirement savings plan, such as a 401(k) plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.

 

4.) Learn about your employer’s pension plan.

If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. If you are married, find out if you will be entitled to benefits from your spouse’s plan.

 

5.) Consider basic investment principles.

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve your return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances.

 

6.) Don’t touch your retirement savings.

If you withdraw your retirement savings now, you’ll lose principal and interest, and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

 

7.) Ask your employer to start a plan.

If your employer doesn’t offer a retirement plan, suggest that your employer starts one. There are a number of retirement saving plan options available. Your employer may be able to set up a simplified plan that can help both you and your employer.

 

8.) Put money into an Individual Retirement Account.

You can put up to $6,500 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages. When you open an IRA, you have two options – a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. The after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.

 

9.) Find out about your Social Security benefits.

Social Security retirement benefits replace approximately 40% of pre-retirement income for retirement beneficiaries. The amount of wages that Social Security retirement benefits replace varies depending on your earnings and the age you choose to start receiving benefits.

 

10.) Talk to your employer, your bank, or a financial adviser.

Ask questions and make sure you understand the answers. Get practical advice and act now.

 

 

Tailoring Your Retirement Income to Fit Your Lifestyle

The ideal monthly retirement income for a couple differs for everyone. It depends on your personal preferences, past accomplishments, and retirement plans. The amount needed in retirement varies depending on your family make-up and your lifestyle.

 

Quantifying Family Needs and Commitments

Most estimates of a couple’s financial needs in retirement assume it’s just two people. However, you may have children or dependents that could change your monthly retirement income projections.

The larger your family and the more dependents you have, the greater your monthly retirement income should be—more people means higher expenses. Healthcare costs, food, housing, entertainment, and other expenses can increase with each additional person in your household.

Even if you don’t have live-in dependents—but support an adult child, grandchildren, or an aging parent—you may require a higher income than someone with no dependents.

 

Your Social Security Benefits

The timing of your retirement can affect your Social Security benefits. For instance, starting Social Security benefits as early as 62 can reduce your benefit by up to 30%. Waiting until full retirement age (usually 66 or 67) allows you to receive 100% of earned benefits.

 

The Savings and Investments Effect

Your retirement age can impact your accumulated savings and investments. Retiring later can allow your nest egg to benefit from compounding. It can also reduce the years you need to spread your savings, allowing for higher monthly income without prematurely running out of funds. On the other hand, retiring younger may require you to live on a lower monthly income to reduce the likelihood of outliving your savings. It’s a balance you need to carefully consider.

 

Assessing Your Financial Situation

Your financial situation is a predominant factor in determining your monthly income goals. One area carries more weight than others: housing costs.

Unless you’ve paid off your mortgage, housing costs may be your most significant expense in retirement. According to a study from the Joint Center for Housing Studies at Harvard, almost 11.2 million older adults spend over 30 percent of their income on housing. Nearly 41% of retirees between ages 65 and 79 still carry a mortgage; it drops to 31% for those 80 and older.

 

Anticipating Healthcare Costs

Health care is another substantial expense in retirement. According to the Employee Benefit Research Institute, a 65-year-old couple would need $351,000 in savings for a 90 percent chance of covering healthcare expenses. Medicare may cover some costs, but you must foot the bill for many deductibles, coinsurance, copayments, and outpatient services. Fortunately, Medicare Supplement insurance  can pay out-of-pocket healthcare expenses that Medicare doesn’t cover.

 

Long-Term Care

The Department of Health and Human Services projects that individuals 65 and older are 70% more likely to need some form of long-term care services. It’s often not a question of if most people will need long-term care—it’s when. Long-term care is a type of assistance designed to help you with some or all basic activities of daily living.

Long-term care insurance can help you cover long-term care costs and empower you to decide how you want to receive care. The American Association for Long-Term Care Insurance recommends acquiring long-term care insurance between ages 52 and 64 or earlier if you choose. If you forgo this insurance, your monthly income should account for the possibility of needing this service.

 

Factoring in Your Preferred Hobbies and Activities

How do you anticipate spending your retirement years? Your hobbies and activities are important to enjoying retirement and directly related to the retirement income you will need.

Regardless of your lifestyle, thinking through these financial implications is critical.  Discuss the lifestyle that you want in retirement with your partner and other family members, if appropriate.  Find a financial planner that works for you. Don’t just take the first one you meet. Financial planning can be challenging and often times overwhelming.  Trust is important and you want to know that your financial planner has your best interests at heart.

 

You’re on Your Way to  a Stress- Free Retirement

Planning for retirement involves looking at a bunch of different factors, like your lifestyle, financial goals, and future needs. By setting up automated savings, staying informed, and tailoring your plan to your lifestyle, you can build a solid and flexible strategy. With some thoughtful prep and a well-rounded approach, you can look forward to a relaxed and enjoyable retirement.

 

 

For more great tips on planning for your retirement, The Ohio Masonic Communities is your go to resource on all things senior living. The Ohio Masonic Communities offers three senior living communities across the state of Ohio – Browning Masonic Community in Waterville, Ohio, Springfield Masonic Community in Springfield, Ohio, and Western Reserve Masonic Community in Medina, Ohio – each offers premier living options with exceptional experiences so residents can live their best lives. If you are interested in learning more about one of our communities, give us a call at 1-877-881-1623. We will be happy to answer all your questions and be a trusted resource in the search for the right community for you!