The Time to Plan for Retirement is Now
It’s National Retirement Planning Week (April 13-17)—a perfect opportunity to focus on arguably the most important piece of the financial-planning pie.
Bluntly stated, there is an urgent need for retirement planning. A unique set of challenges has emerged that make planning essential, including changes in employee benefits, longer life spans, and rising costs of health care. Add to these challenges another reality: more Americans are shouldering the burden of saving for retirement on their own.
Only 54 percent of non-retired
respondents to a recent FINRA
Foundation study said they have
some kind of retirement account.
Become Retirement Ready
Many Americans are not financially prepared for their post-working years. Only 54 percent of non-retired respondents to the FINRA Investor Education Foundation's National Financial Capability Study said they have some kind of retirement account.
But the National Retirement Planning Coalition—the group of prominent education, regulatory, consumer advocacy and financial services organizations behind National Retirement Planning Week—believes retirement readiness is achievable. The Coalition recognizes that saving and crafting a plan for retirement is a long-term process and with different steps at difference stages of life. To help us on our way, the Coalition offers resources for everyone from students to grandparents. These resources aim to help us take steps, both large and small, on the path toward retiring on our own terms.
Steps to Get You Started
Planning for retirement starts with having a ballpark idea of longevity and how much money you will need in retirement.
Use the Social Security Administration’s Life Expectancy Calculator to help determine how many years of retirement you might need to plan and save for.
Then try one or more retirement calculators to estimate how much you’ll need to save to meet your likely expenses. Many retirement experts estimate you’ll need between 70 and 85 percent of your pre-retirement income to maintain your standard of living after you stop working. But that formula might be too simple, and possibly too low, to account for what you’ll actually spend. For instance, you’ll need more if you have expensive hobbies or plan to travel a lot. You may also need more if you or your spouse or partner are in poor health and have substantial medical expenses.
Most important, save money in accounts earmarked for retirement.
And save smart. Whenever possible, use tax-advantaged savings accounts like 401(k)s to save money on taxes and boost retirement security. Contributions to a traditional 401(k) are not subject to income tax withholding and are not included in your taxable wages—and earnings on Roth 401(k) contributions are tax-free. In 2015, contribution limits increased, so you can contribute up to $18,000 to your 401(k)—and if you're aged 50 or over, you can contribute an additional $6,000 for a total of $24,000.
Any day is a good day to start, or increase, your retirement savings and step up your planning. What better time to take action than National Retirement Planning Week?