Retirement Financial Planning Tips for All Ages

July 3, 2019

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People don’t always like to think about it, but chances are someday you’ll be retired. Although it’s nice to think that you’ll be able to trade work for leisure, it’s something that many don’t plan for. That is where the problem starts.

Many people who reach retirement realize too late that they didn’t properly plan and must do some financial scrambling to make sure they can achieve even some of the luxuries they dreamed about. Retirement financial planning shouldn’t be something you wait to think about when you are 60 and it’s too late; it’s something everyone of all ages should look into sooner rather than later.

This talk may be scary, but it doesn’t have to be! We’ve made a list of tips to improve your retirement plan, no matter your age.

1. Start your plan today!

You have probably heard this a thousand times from family members, friends, and advisors alike, saving for retirement as soon as possible is a fantastic way to invest in your future. Not to mention, with compound interest on your side, your investments will be making money on their own. Who doesn’t like free money?

It is proven that starting to invest early in your life will make you more money than waiting. Take this example, say you want to start investing at the age of 25. You put aside $75 a month and you get a 6% return. Now compare that to investing $100 a month at 6% return starting when you are 35. By the time you are 65, even with investing less money per month, you’re earning potential is almost $50,000 more in savings just by starting 10 years sooner!

2. Contribute to your 401 (K)

Does your employer offer a 401(k) plan that you are eligible for? We suggest taking advantage of it! Traditional 401(k) plans allow you to contribute pre-tax earnings. This is not something you have the luxury of having every day, so you shouldn’t sleep on it.

This means that you’ll get more out of your paycheck by investing some of it into your plan, rather than taking it all home and having it taxed before you even get to deposit it. The biggest benefit here is that your investments, dividends, and capital gains accrued within your account are not subject to taxes until you begin withdrawing the funds at retirement.

3. Meet your employer’s match

Alongside your 401(k), sometimes employers offer investment matching. We recommend meeting your employers match if it’s being offered. For example, if your employer offers a 50% match (up to 5% of your salary) and you make $80,000 a year and you invest $4,000 into your 401(k) plan, your employer would pitch in an additional $2,000!

This is legitimately free money, so make the best of the benefit and your plan, as it will add up over time.

4. Open a Roth IRA

What is a Roth IRA? This is simply a retirement fund that allows you to deposit your money into the account and withdrawal it any time tax free. The only catch to withdrawing the money before the set age of 59.5 is that you will be penalized with a hefty fee.

An IRA is not actually an investment in itself, it is just a retirement account that can hold those investments. Starting one of these accounts at a young age will allow you to have decades worth of compound interest which will grow your investments into something substantial over time. This is a great opportunity for any young investors who are looking for huge growth potential.

5. Automate your savings

This tip is one that is covered a lot. Simply set up your deposits to automatically put a certain percentage of your earnings into your savings account. This is a great way to be saving for retirement without even having to think about it – money will just be deducted from your paycheck right into your savings. One time set up and you don’t have to think about it; how easy is that?

6. Curb your spending

Building healthy spending habits is such an important aspect of your savings plan. We suggest writing down your budget to determine how much money you are working with on a month-to-month basis. Using tools such as budget worksheets or cash flow calculators can be very helpful. These tools allow you to factor in how much you make and spend each month to help you identify areas you can cut back on, so there is more money for investing or saving. If you have an on-the-go lifestyle, there are a variety of apps to make it even easier to budget as you go.

7. Downsize your home

As you get older, thinking about downsizing your house is a great option for additional savings. There are countless stories of people having 2 or more kids and needing a bigger home to live comfortably, but what happens when they grow up and move out? Is it justifiable to continue to make the same payment for the house?

Downsizing gives you a chance to sell your home and find something smaller and less expensive, allowing you to take extra money from the sale to put towards your savings.

8. Find a trustworthy financial advisor

Dealing with a large retirement portfolio can be a stressful endeavor, especially when retirement is on your mind. You may even find that as time goes on, you have less interest than you did while you were accumulating funds during your working years. This is why finding a trustworthy financial advisor is worth the investment.

A financial advisor has the skill set to look at your situation from a bird’s eye view, make inferences, and develop multiple strategies that can benefit the success of your financial plan. Something else to be considered is that the financial world is getting more complicated daily. This is why it’s best to develop a strong relationship with a competent financial advisor earlier in your retirement life.

At Davie Kaplan CPAs, we have a team of retirement planning experts, located in the Rochester, NY area, who can help you with all of your retirement finance questions and strategies. Contact us for the answers to any questions you may have or visit our services page for more information.

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