Remember that planning for retirement needs to start decades before you retire -- and the sooner, the better. The dollar amount you need to retire comfortably, is highly personalized just for you - your desires & your needs!
There are numerous rules of thumb that can give you an idea of how much to save.
Whatever method used to calculate your retirement savings needs, start as early as you can.
Life Stages as you Plan for Retirement
Below are some general guidelines to consider as you successfully Plan for Retirement through different stages of your life.
Young Adults (Ages 21-35)
Those just starting a career and beginning their adult life may not be able to set aside much money for retirement, but they have a huge thing going for them- which is a vital consideration when saving for retirement- and that’s the principle of compound interest. Compound (or compounding) interest allows “interest to earn interest”, and the more time you have, the more interest you will earn. Even if you can only put aside $25 to $50 a month, it will be worth it as the decades go by. Referred to sometimes as the ‘magic’ of compound interest, it’s this principal that will make a sum grow at a faster rate. Young adults should take advantage of employer-sponsored retirement savings plans. Many times the employer sponsoring the plan will offer an additional percentage match to the employees savings, so it certainly can be a sound decision to take advantage of an employer’s contributions to the company-based savings plan. |
Early Midlife (36-50) Early midlife can bring a list of monetary strains. This might include a mortgage; student loan repayment; childcare expenses; auto, homeowners, health and life insurance premiums and credit card debt. Despite this long list, it continues to be critical to save at this stage of life. Hopefully this stage brings an advantage in that earnings have increased so the combination of earning more and still having a couple decades for your money to grow can make for several years of concentrated saving. As initiated earlier in life, following through with weekly/monthly deferment to a savings plan proves to be a critical component of pending retirement. And whether you ‘wear the hat’ of a bread-winner, a high-income earner or a business owner, don't neglect the topics of life insurance, disability insurance or business overhead expense insurance. Any one of these hats you wear means there are probably several people at home or at work, that are dependent on your income to live their life. You want to ensure your family could carry on, should something happen to you. |
Later Midlife (50-65)
Continue saving- as this becomes crunch time. Hopefully the list of monetary strains has diminished somewhat by now….mortgages paid off, children out of college, student loans paid off. Obviously time is beginning to run out as you save for retirement, but the big advantage is these years are typically your highest earning years. Saving accounts should become more conservative but take advantage of more disposable income and contribute as much as possible to retirement. Even at this stage, it’s never too late to get started!
You've Decided to Retire! Now What?
Review the Numbers: The closer you are to retirement, the more critical it becomes to calculate available savings and subsequent withdrawal amounts- to help ensure lifelong income. Using assets to set up a guaranteed lifetime income for you & your spouse may prove a good decision!
Terminate health insurance and enroll in Medicare: Knowing how & when to terminate an individual or group health plan & coordinating this task with Part A & B Medicare enrollment can be complicated. Remember you’re dealing with the Federal government here, so it will be in your best interest not to take anything for granted!
Decide on Medicare Supplement & Part D -or- Medicare Advantage: This fills in some of the gaps that Medicare doesn't cover. Most people don’t know there’s only a 6 month window (once Part B is activated) where the retiree does not have to go through medical underwriting. Anytime after this, medical screening is implemented and people may be declined coverage. Retirees may not actually need these supplemental policies when younger and healthy, but as the decades go on it will prove a sound decision to obtain coverage while they are eligible.
Terminate health insurance and enroll in Medicare: Knowing how & when to terminate an individual or group health plan & coordinating this task with Part A & B Medicare enrollment can be complicated. Remember you’re dealing with the Federal government here, so it will be in your best interest not to take anything for granted!
Decide on Medicare Supplement & Part D -or- Medicare Advantage: This fills in some of the gaps that Medicare doesn't cover. Most people don’t know there’s only a 6 month window (once Part B is activated) where the retiree does not have to go through medical underwriting. Anytime after this, medical screening is implemented and people may be declined coverage. Retirees may not actually need these supplemental policies when younger and healthy, but as the decades go on it will prove a sound decision to obtain coverage while they are eligible.
Understand Social Security Benefits: For the large majority of Americans, Social Security will by far, be their primary source of retirement income. Delaying activation of Social Security, at a rate of 8% annually after age 67/Full Retirement Age, can truly make a positive impact when there’s a 50% chance of one spouse in a couple living to age 90.
Have the Long-Term Care conversation: No one wants to talk about getting sick, but the statistics are obviously overwhelming that people get sick as they age. Having a plan to cover these exponentially rising costs if illness, debilitating injury or dementia occur, is imperative in today’s world. Medicare might cover the first 100 days- but after that, without a sound plan, virtually all your assets can be spent on healthcare costs. * This is the #1 risk to assets during retirement!
Estate Planning Documents Checklist: Preparation of legal documents is imperative. Items to consider reviewing with a qualified attorney may include: Will, Trust, Healthcare Directives, Living Will, Medical Powers of Attorney, Financial/Durable Powers of Attorney, Beneficiary forms on all contracts, Life insurance and Estate Tax.
