Saving 10 Percent of Your Income From Day One Can Lead to a Comfortable Nest Egg
Are you on track for an enjoyable retirement? This question is answered much differently if you're in your 20s and 30s than if you’re in your 50s or early 60s.
For the young investor, keep this in mind: As life expectancy rises, you can expect to be employed 40 to 45 years and then have 25 to 30 years of retirement. So you may need to think long term and plan effectively.
If you just turned 50, focus on maximizing your contributions to your company retirement plan, your IRA or your SEP if you’re self-employed. Study your pension and its investment strategy. You should limit any risk. Think about the age you'd like to retire and use it as a guide to determine the approximate income you'd like to have upon retirement.
Whether a millennial, a Gen Xer or a baby boomer, retirement planning is the process of identifying your long-term income, determining your intended lifestyle and then figuring out how you reach those goals. You’ll also need to keep in mind that for each additional year you hope to retire early, your investment needs greatly increase.
Here are some other strategies you may want to consider for your retirement planning, depending on your age:
Reduce or eliminate debt such as student loans.
Save between 10 to 15 percent of your income. Saving 10 percent throughout your lifetime could be sufficient to provide a solid retirement nest egg.
Continue to build your retirement accounts even while saving for children's college expenses and paying off your mortgage.
Employ long-term strategy and a balanced portfolio with investments.
Contribute the maximum to your workplace retirement plan or other business retirement plan.
Contribute to a traditional or Roth IRA, and consider a deferred variable annuity.
You have a significant amount of savings, but keep saving and save more, if possible.
In your 50s you can even increase your pre-tax contributions with "catch-up" contributions to 401(k) plans.
What to do if you are not on track for necessary retirement savings? You may want to remain working longer and continue to save.
Many pension plans allow you to start collecting retirement benefits as early as 55. If you decide to start receiving benefits before you reach full retirement age, the size of your monthly payout will be less. Keep in touch with your pension administrators to keep you informed.
Keep saving. A Roth IRA may be a consideration.
Postpone Social Security benefits until age 65 or even 70.
Adjust your risk tolerance. You need to be more conservative with your investments.
If you have an annuity, know the options available to you for retirement and when may be the optimum time to receive payments.
The bottom line is that a lack of action with your long-term financial planning can result in huge consequences and put a comfortable retirement at risk. You'll enjoy retirement more if you plan, learn about your investing choices and find help when you need it. Our representatives at J.G. Wentworth may be able to help you get the cash you need for investments, including opportunities with investment property, paying off your mortgage faster and available options with your annuity.
(Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services).