Submitted by First Bank of Baldwin
Saving for retirement can seem like a daunting task. How do you know how much you need? What are the best ways to save money? When should you start withdrawing those savings? While the path to a comfortable retirement differs from person to person, there are four key steps to take, no matter where you are in your retirement savings journey.
Start Saving Right Now
Whether you're 21, 35, or 50, if you haven't started saving for retirement yet, now is the best time to start. The earlier you start building your nest egg, the bigger it will grow. If your employer offers a 401k plan, join as soon as possible. If they offer a match, make sure you're meeting it. Even if it's just an extra $50 per month, that money will add up exponentially over time. In addition, make sure you leverage of any catch-up advantages available to you, especially if you started saving later in your career. For example, if you're over 50, you can receive partial tax deductions on up to $6,500 in contributions to an IRA account (the limit is $5,500 for those under age 50).
Make a Personalized Plan
Starting to save is the first step, but to really build a solid retirement savings, you need to have a detailed plan to take you from the first penny saved through to your post-retirement life. To create that plan, first calculate how much money you'll need when you retire. That amount will vary based on your current age, the age you plan to quit working, the lifestyle you want to have in retirement, anticipated medical needs, and a variety of other factors. There are dozens of good retirement savings calculators available online, so try a few out to get a good ballpark of what you'll need to have saved when you say "goodbye" to your nine-to-five forever. Make sure your plan includes an estimated post-retirement budget for your household. You don't want to end up in a situation where you saved enough, but spent too much of that savings too early. Create a budget that accounts for the lifestyle you want, as well. Whether that's a line item for "travel" or "spoiling the grandkids" is up to you!
Take Control of Your Expenses
Now that you have a plan, you need to make sure you can follow it. One good strategy is to pay down as much debt now as you can, including your mortgage and any credit card bills. If you plan to stay in the same home when you retire, paying off your mortgage before you stop working is an excellent way to reduce the amount of recurring expenses that will impact your fixed income post-retirement. If you're currently carrying a lot of debt, consider consolidating to make paying it off simpler. This will also help with projecting how much you'll need to save for retirement.
Make Sure You Have Insurance
Finally, make your future expenses easier to deal with by making sure you purchase the appropriate forms of insurance. Health insurance is essential to help cover medical expenses post-retirement, and home/property insurance is critical if you intent to continue owning your own home. However, most aging adults should also consider purchasing long-term care insurance. This specialized form of insurance covers the cost of health care that extends beyond a typical hospital stay. Having to spend your nest egg on long-term care (which can easily reach into the tens and even hundreds of thousands of dollars) is not what you've been saving up for throughout your career.
Ultimately, planning for retirement is a complex process and most consumers will benefit from consulting a professional. Talk to your local bank about setting up a meeting with a financial planner to help you lay out the right path for you.