Retirement planning is my favorite area of what we do, because I love helping people gain financial freedom and fully enjoy their retirement years. Whether retirement is coming sooner or later for you, these are some tips to keep in mind.
Lifestyle: Decide your standard of living in retirement and ask yourself how much income you would like per year. Then subtract Social Security, pension payments and other income you are sure to receive to calculate how much income you will need to generate from “elsewhere.”
Manage investments: Younger folks have more time until retirement, so they can usually be more aggressive with their investments. But if you are nearing or are already in retirement, your investments should be more conservative as you don’t have the time horizon to lose a large amount of your nest egg.
Invest through your work: Take advantage of your retirement accounts through work. The sooner you start to save, the better. The limit for employee contributions to a 401K is $19,000 in 2019. If you are over the age of 50, you are allowed to save an additional $6,000 per year up to a total of $24,000. If you have an employer match, that’s essentially “free money” that will help build your nest egg.
Open an IRA: If you don’t have an employer plan, open an Individual Retirement Account. You can do this at any brokerage firm and the contribution limit for 2019 is $6,000 per year, or $7,000 if over the age of 50. The key is to save as much as you can into tax advantaged retirement accounts first and then save into non-retirement accounts after.
Plan for health care: If you are planning to retire before you are eligible for Medicare and will have no other health insurance, make sure there is enough in your savings to cover any large medical expenses that may arise during this time.
It can be an emotional experience to draw down your savings after spending 30 or more years accumulating assets, but this why you saved in the first place. Talk to a financial advisor if you want a score on how you are doing with retirement savings or if you are afraid of overspending your nest egg. My most important tip is to enjoy the freedom you’ve worked so hard for!
Allison Nye, Wealth plan design specialist at oXYGen Financial. Co-host of “They Don’t Teach You This” podcast. Connect with her at firstname.lastname@example.org.