Creating a retirement plan may seem overwhelming if you have never done it. But it doesn’t have to be that way.
What is the average retirement savings needed for residents of Iowa? Are you on track?
According to a recent Employee Benefit Research Institute (EBRI) Retirement Confidence Survey, many people don’t think that they are doing a good job financially preparing for retirement. EBRI found that only 28% of workers were confident in their retirement planning. Another 28% of people said that they were either not too confident or not confident at all.
Whether you’re dreaming of relocating nearer the grandkids, starting a new hobby or going on that cruise of a lifetime, if you can picture what you want retirement to look like, it’s easier to plan for it.
Where to Start
Retirement planning is the process of figuring out how much money you’ll need to save for retirement and then putting a plan in place to get there. The hardest thing about saving for retirement is probably just getting started. And it’s never too early to start planning for your retirement future.
First and foremost, you should think about what you want out of retirement. What are your goals, dreams and aspirations? To get a better idea, ask yourself the following questions:
- When do I want to retire?
- What do I wish to do in retirement?
- How much money will I need to save before I get to retirement?
- How much do I need to invest monthly to get there?
- What retirement accounts are best suited to my goals?
- Am I factoring in healthcare and long-term healthcare?
Start by using a financial calculator to assess your “needs-by-numbers”. Online calculators are (mostly) free online tools that aim to predict your retirement nest egg in today’s dollars, then show you how your money will stretch over your golden years. Consider all these current and potential expenses. Once you have an idea how much you’ll spend each month in retirement, you can calculate how much you’ll need in savings.
Get Saving & Investing
Once you have your numbers down, it’s time to tackle any debt you may have. Start with the largest amount owed first then make your way down – making necessary financial sacrifices along the way in order to help you reach your debt-free goal.
Next, is to build your emergency fund. Having an emergency fund means you don’t have to tap your IRA, 401(k), or other taxable assets to pay for unexpected expenses—or worse, rejoining the workforce. Aiming to save 6-12 months of expenses is the rule of thumb.
Once you are more financially stable in preparation for the worst case scenario (think a global pandemic!), you can begin saving and investing for retirement. When it comes to a retirement plan, there is no single way that everyone should allocate their savings. You might want to consider different account types or investments depending on what outcome you are looking for. This is where an experienced retirement income and wealth management advisor comes in.
Most likely, retirement advisors will be more well-versed on all there is to know on how to invest best and save your money. They can look at your plan from a third-party standpoint and help you determine your goal, where there are strong points that are working, and what may need improvement. Your advisor can also help you to stay level-headed when the market is volatile.
Options to discuss with your advisor for saving and investing can include:
- Company sponsored retirement plans like a 401(k) or 403(b)
- Individual Retirement Accounts (IRAs)
- Roth IRA
- A variety of investments like mutual funds, stocks, bonds
- Life insurance that builds cash value
The sooner you start, the more potential your money has to grow over time.
Review Your Plan Regularly
Once your plan is in place, that doesn’t mean you can turn a blind eye and hope for the best. Reviewing your retirement portfolio on a regular basis is just one of many ways you can take steps towards a life of financial independence and confidence in retirement.
Adjusting your investment strategies based on your goals, age, and your risk tolerance can help you take control over financial stability in retirement. Check on your investments at least annually, in order to help ensure that your portfolio is correctly structured in terms of asset class exposure or investment options. This will also help inform you about how your portfolio is performing, and whether you’re on track to live out your retirement as planned.
Successful retirement planning in Iowa takes time, focus, and a thorough understanding of the myriad of investment options available to help you save.
At Johnson Wealth and Income Management, our commitment is to help you work towards achieving all your financial goals and to help provide you with a “worry free” retirement. Reach out to us here today to find out more.
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