Do you need to step up your game when it comes to retirement saving?

We are well into the new year and resolutions are in full swing. Maybe this year it’s not about eating better or getting more exercise, but instead about your financial health, which can have a profound impact on living comfortably down the road. Even if you are several years off from retiring, there’s no time like the present to take a deep dive into your retirement plan to make sure you feel confident about your future. 

Generally speaking, most people don’t feel like they are saving enough, or they simply don’t know how much to save in order to retire with the lifestyle that they envision. Instead of being a catalyst for action, however, these feelings can sometimes have the opposite effect and cause decision paralysis. Without knowing what steps to take, people will often choose not to think about the topic of retirement planning and will therefore let more time slip by without a solid plan. 

It’s never too late to start planning, though. Some groups, such as AARP, have started campaigns to help people at any stage of their retirement planning process. AARP calls their campaign, “This is Pretirement” with hopes that it will raise awareness and alleviate some of the stress people may be feeling when they think about saving for the future. The campaign features ads on radio, tv, and social media, and has a website, ThisIsPretirement.org, where you can take a quiz and begin building your plan. 

There are also some “baby steps” you can take in order to move forward in the planning process. 

Budgeting 

Many experts will tell you to start with a simple budget outlining your income and expenses. If not sure how to get a budget set up, a financial professional, such as Summerlin Benefits Consulting, can assist you. You and/or the financial professional can then dive deeper into the areas where you are spending your money in order to better identify where you can save. You can then set goals as to how much you’d like to “put away” towards retirement each month. Having a written budget may also hold you more accountable to your spending (and therefore goals) once you get started. 

Take a look at your contributions 

If you are still working and your employer offers a 401(k), you can set up contributions that will come directly out of your paycheck. For those who don’t have access to an employer-sponsored plan, or those who are retired or self-employed, there are individual retirement accounts, such as IRAs, that can be set up to do the same thing. You will just have to make the contributions as opposed to them pulling directly from a paycheck.  Even if small, contributions can help build a nest egg for you to use in retirement. 

What if you have been making contributions, but wish the contributions had been larger? There is something called a catch-up contribution for individuals who are age 50 or older, which allows you to make additional contributions each year beyond the standard limits and can help you make up for those lower contributions earlier in life. Effective this year, catch-up contributions for 401(k)s and IRAs have increased by an additional $7500 and $1000 (respectively) beyond the standard contributions.  So, new contribution limits are as follows. 

401k contributions: 

Under age 50 may contribute up to $23,000 

Age 50+ may contribute up to $30,500 

IRA contributions: 

Under age 50 may contribute up to $7,000 

Age 50+ may contribute up to $8,000 

Estimate your income 

Start to identify the sources of income you’ll have in retirement, including pensions, social security, and other investments. Did you know you can go to the Social Security Administration website, SSA.gov and see how much you will get depending on when you choose to initiate your Social Security benefits? 

If you anticipate needing more money in retirement to offset the expenses you’ll have, you can also look into other sources of income, such as Fixed Index Annuities (FIA). Some FIA operate similar to a pension and allow you to turn on income when you need it. Some even include long term care benefits, which can be a huge benefit considering the cost of long-term care should you need it. FIA will grow your initial premium at a reasonable rate over time until you are ready to initiate the income. 

Work as long as you can 

Retirement is viewed as the time of life when you finally get to relax from the continuous, daily grind of working, raising a family, etc. Many picture their retirement taking place on a sunny beach with a drink in one hand and a book in the other. While this can certainly be a reality, you may want to entertain the idea of working a little longer than expected or doing part-time or consulting work once you have retired. 

While you may think this sounds crazy, there are also several benefits to consider. First, the additional income that you weren’t accounting for could certainly help boost your nest egg and make it last longer, if needed. Additionally, working in retirement may help you maintain the sense of productivity that some tend to lose when they quit working. A job can become a large part of one’s identity while in their working years, and leaving the job when beginning retirement can often put an unexpected strain on one’s mental health. 

But, not all are healthy enough to continue working in retirement, so it is probably best to look at it as an “added bonus” to your nest egg if you are able to do so and not rely on the extra income. 

Hopefully you’ve picked up on the theme by now, and that is to put aside as much as possible. It is never too late to start and there are baby steps you can take if the topic of retirement planning overwhelms you. 

You can also ask for help from a financial professional, such as Summerlin Benefits Consulting. We keep things simple and walk our clients through each step of the way! Don’t spend another day stressing about your retirement plan- call us today for a free, no-obligation meeting.