Published on July 29, 2021
Written by The Servion Financial Advisors Team
“Unfortunately, many people wait until they are almost ready to retire to start planning for retirement,” said Patricia Wenzel, president of the National Association of Plan Advisors in an interview with CNN Money. The early you get started, the better. One idea is to pick a desired retirement age, and then work backwards to figure out whether you need to up your savings rates or cut your spending.
Most experts suggest saving anywhere between 10 percent to 15 percent of your gross salary, which includes contributions you may receive from your employer. Saving more is better, if you can afford to, of course. And once again, timing matters: the sooner you start saving, the more time your money has to potentially grow.
The power of compound interest is remarkable. Stashing your money in a regular savings account will earn you next to nothing, whereas investing it can earn you a substantial amount. You can invest by putting money in a 401(k) plan at work, where you can get matching contributions if your employer offers them. Other investment options include individual retirement accounts (IRAs), health savings accounts (HSAs), and annuities. Your financial advisor can help you decide what investing methods may fit you best.
Cutting back on spending is another way to save. Take the time to set up a budget and then stick to it. When you sit down and really examine your monthly spending, you might be amazed to see where your dollars go, and find expenses you could easily cut back on or even eliminate.
Carrying debt into retirement means you’ll probably have to use retirement funds to pay it off. Paying off big ticket items like your house, cars, student loans and credit cards before you retire helps preserve your nest egg longer.
Withdrawing too early from retirement accounts can lead to costly penalties and income taxes, which only eat away your funds. There are different withdrawal rules depending on account type and your age, so speak with your financial advisor in the years and months leading up to retirement so you don’t make a mistake by withdrawing from the wrong account too early.
Retirement planning can seem daunting, but it isn't something people have to handle alone. Financial advisors help people develop personalized strategies and work toward retirement savings goals. Servion Financial Advisors is always willing to help, as are advisors in your local area.
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