How do I Know I’m on the Right Track for Retirement: A Guide to Becoming More Financially Secure

The biggest question we get when clients and prospective clients walk through our door is “Can I retire?” or “Am I doing the right things to get to retirement?”

Andrea J. Zoeller, CFP®

Feb. 12th, 2019

A road in fall
A road in fall
How do I Know I’m on the Right Track for Retirement: A Guide to Becoming More Financially Secure

For most, retirement seems like a goal that is long away and out of reach so setting up a retirement plan and putting it on autopilot works until all of a sudden 20, 30, or 40 years have gone by and retirement doesn’t seem so far away anymore. Creating the financial plan for our clients is the core of our planning process and something we encourage everyone to see at some point in their lives as they plan for retirement.

Below is a guide containing some pointers to assist you in reaching that retirement goal someday. No matter your age, these guidelines are useful for young individuals as well as individuals close to retirement.

  1. Take advantage of your employer’s matching contribution
    • If your employer offers a match, the first goal should be to put in enough to the 401(k) to receive that match.
  2. Take advantage of the Roth component in your employer’s retirement plan (if applicable)
    • If you are in a lower tax bracket, the Roth portion of the 401(k) allows you to put in after-tax contributions that will grow tax-deferred and be tax-free upon distribution in retirement – a huge advantage for younger individuals.
  3. Contribute to the Health Savings Account (if applicable)
    • Individuals who are part of a high deductible health plan can set up an HSA to contribute to which allows pre-tax dollars to go in, grow tax-deferred, and distribute tax-free if used on qualified medical expenses. An HSA is different from its “use it or lose it” counterpart FSA plan because the unused funds remain in the account year after year and can be saved all the way until retirement and used for medical expenses in retirement.
  4. Aim for contributing 10% to your 401(k) or employer retirement plan
    • Once you reach this goal, aim for the max! The maximum contribution limit for 2019 is $19,000 for individuals under 50. If you are over age 50, you can put an additional $6,000 in.
  5. Contribute to an IRA or Roth IRA
    • If an employer retirement plan isn’t an option or you’re maxing it out already, an IRA or Roth IRA is the next retirement account option that can offer tax deferral advantages.
  6. Contribute to a Non-Qualified account
    • If you don’t qualify for contributing to an IRA or you have maxed out both your 401(k) and an IRA, the next investment account to start building up is a non-retirement account which will offer another bucket to utilize in retirement or before retirement.
  7. Build up an emergency fund
    • Aim for putting away 3-6 months of expenses into an emergency fund so that if the wrong thing happens, you don’t have to worry about expenses or pull from accounts intended for retirement.
  8. Manage debt responsibly
    • Focus on paying down higher interest debt first and then move on accordingly. Using debt to leverage your spending power is a powerful tool if done responsibly. Not all debt is bad debt but knowing when and which kind to use is important.
  9. Develop a budget
    • Many individuals don’t worry about a budget during their working years because income coming in pays for expenses going out and that works, but once you get to retirement the story changes. You have to make this nest egg last and it’s hard to know how much to save, if we don’t know how much is spent so developing that budget early will not only help reach those savings goals now but also will help with developing a viable income strategy later on.
  10. Talk to a financial professional
    • Although the above steps are a great guide to getting started, the ultimate plan to reach the goal of retirement goes much deeper.

A financial professional can offer detailed guidance on asset allocation, how to create the budget and manage debt, give guidance if the Roth option is appropriate in your situation, develop a financial plan that puts it all together, and much more.

Please contact our office if you have any questions regarding this topic.

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