Financial Planning

It’s National Retirement Security Week and we’re sharing 12 planning tips that can help as you prepare for retirement and throughout your retirement.

1. Save early and often.
   The time value of money can be a very powerful thing. Saving just a small amount each year beginning early in your career can significantly impact the value of your investments over the long term. For instance, if you saved $1,000 every year starting when you were 18, growing at an annual rate of 8% (mostly stock portfolio), the account could grow to roughly $350,000 when you’re 60. All else the same, if you start saving the same amount at age 30 the account would have a value of only around $130,000 at age 60.
2. Understand your retirement saving options.
   Take advantage of your employer’s qualified retirement plan and save as much as you can, or at least up to an employer match threshold, if available. If your employer doesn’t offer a plan, ask about the possibility of starting one. Another option is to put money into Traditional or Roth IRAs.
3. Set your financial goals for retirement.
   It might seem like a lifetime away but it’s never too early to think about what you want your retirement to be. If you’re not sure, consider different scenarios. This can help you plan properly and gain some helpful context for savings targets and understanding the impact of investment returns.
4. Understand investment principles and the risk/reward trade off.
   If you’re many years from retirement, investing your retirement plan solely in cash or fixed income securities is generally not a productive investment approach even if you want to avoid volatility in the market. In contrast, investing solely in stocks may be unwise if you are two years from retirement. When planning for a secure retirement, how you invest is just as important as how much you save.
5. Keep it simple.
   A complex investment approach doesn’t necessarily translate into a successful approach. Having a fully diversified portfolio through a limited number of investment options (e.g., mutual funds) can make it easier to monitor your portfolio and make adjustments when necessary.
6. Don’t touch your retirement money.
   It might be tempting to access your retirement assets for short-term goals or to fund important events, but resist the urge. The longer you can keep your assets invested (benefiting from tax-deferred or tax-free growth), the more you’ll have available to meet important goals in the future. A little sacrifice in the short-term can go much further in the long-term.
7. Have an emergency fund in place.
   Maintain a savings account with roughly three to six months of expenses for unexpected costs or unforeseen events, such as medical expenses or losing a job. An emergency fund can limit the need to access longer-term investments or use high interest debt.
8. Set a plan and monitor it.
   Things change over time. People get married, have children, change careers, move, etc. Setting a plan is very important, but it’s equally important to monitor your plan at least once a year. This way, you can make any necessary adjustments so you can stay on track towards your retirement goals.
9. Retirement planning doesn’t end at retirement.
   People work hard to prepare for retirement, but oftentimes have to adjust to their new lifestyle. There may be changes early in retirement, so continuing to monitor your retirement plan is just as important as when you were focused on saving for retirement.
10. Understand what you can control.
    Day-to-day market volatility is generally out of your control. Knowing the areas of your financial life that you can control will help to increase your sense of retirement security. A personal budget will help you understand where you could cut back if the market experiences a downturn.
11. Incorporate life insurance.
    Buying enough life insurance if you have a family is as important as having a strict savings plan. You should have enough insurance to replace ten or more years of income as well as pay off debt and possibly set aside money for college.
12. Research Social Security options and Medicare.
    Social Security and Medicare can be confusing. As you approach retirement, take the time to review your options and how those benefits impact your financial plan. The Social Security and Medicare websites are very good resources.