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Retirement Planning by Life Stage

Retirement Planning by Life Stage

June 01, 2022

Retirement planning isn’t only for those in their 50s and 60s - it’s for everyone! Depending on what stage of life you’re at, there are key things to consider when planning for your future. We dive into four life stages that require thoughtful money moves to set yourself up for your dream retirement.


Single Young Adults

Start saving! The easiest thing you can do is start. There are a handful of retirement accounts to get you saving for the future. If your employer offers a 401(k) plan, contribute enough to get the company match. Ideally, you want to try contributing 7-10% of your income into a 401(k). You may also want to open a Roth IRA and max it out each year. For 2022, you can contribute $6,000 to a Roth IRA. Investing in a brokerage account is another option. This investment can be a great backup account and provides room for growth. The money can be easily accessed at any time depending on how it’s invested and can provide passive income. Think about investing in mutual funds or ETFs rather than in individual stocks. Investing in individual stocks is like putting all your eggs in one basket. Using mutual funds or ETFs exposes you to the market and potential upsides while mitigating market risk.


Remember in this life stage time is on your side! You have 40+ years in the market to grow your investments. Young investors, however, should know the difference between risk tolerance and time. While young people can take additional risks, that does not mean you can turn the dial to 11. We still need to be mindful of the money we’re investing and make sure there’s plenty there for time to work its magic and compound our returns.


Newly Married Couples

Think about your goals. Take some time and individually write down your retirement and financial goals. Then make a list of the goals you want to accomplish together.


Once you have done that, meet with a financial professional. We find this is the life stage where we can really take a deeper dive into a couple's financial situations. We will create a customized financial roadmap that will guide you to and through retirement. (Did you know working with an advisor could actually save you money? Click here to learn how!)


Remember those goals you wrote down? Bring those with you when you meet with a financial professional. Most couples we meet with don’t have the same vision for retirement - and that’s okay! We can invest each of your assets differently with varying levels of risk to ensure everyone gets the retirement of their dreams.


Both spouses should be taking advantage of their employer-sponsored retirement plan and any of their unique investments or benefits your employer is offering you. The goal is to make sure both spouses' plans are different from each other to increase the diversification of risk and investments. Also, look at your tax diversification and make sure you have streams of retirement income from both taxable and nontaxable assets.


Parents with Children at Home

We can’t say it enough, this is the time of life to make sure you are paying yourself first. It can be easy to see the expense of having children and pulling back on your retirement savings to fund your kids’ goals and dreams. But what if you could do both! We like to think of saving for retirement as paying a bill. One bill isn’t more important than the other. You wouldn’t put the utility bill above your kids or vice versa. Both need to be addressed.


A common mistake we see is not having started saving in a retirement account outside of an employer-sponsored plan like a brokerage account or traditional or Roth IRA, meaning you may have to play catchup for years to come. Another mistake is selling your investments when the market is turbulent. That’s the opposite of the “buy low, sell high” adage. Most often, the best days for investments come after the worst days.


If you’re looking for a benchmark, a couple with two children and $20,000+ in their 401(k) and outside investments is on the right track. But how much your need to save for retirement is totally subjective to what your goals and dreams are for retirement. We can plan for a conservative income or a frivolous budget. As long as your expectation and your means align, you can have the retirement you want.


Couples Nearing Retirement

The biggest decision couples need to make as they near retirement is picking the day they will officially enter their golden years. Many couples don’t retire at the same time for several reasons, but it is doable if you and your spouse would like to cross that threshold together.


There are a few things to review before you plan your retirement party. How far away from 65 are you? Medicare doesn’t kick in until age 65. If you don’t have a plan to cover medical costs until then, it may not be the right time for you to retire.


You also need to decide when you will claim Social Security. You can claim as early as age 62, but your benefits will be permanently reduced. If you wait until your full retirement age of 66 or 67, depending on the year you were born, you will receive your full benefit. And if you wait until age 70, your benefit will grow as much as 8% each year you wait to claim your Social Security.


You also need to know how much income you will be giving up to transition to a fixed income made up of your retirement savings while maintaining the lifestyle you want. If you’re stressed about your investments and whether your money will last, feel free to revisit your plan. It’s been years in the making and thoughtfully put together to ensure you can enjoy your retirement.


No matter your age or life stage, consistency is key! Invest in yourself! If you’re ready to begin your retirement planning journey, schedule a meeting with us today, and follow us on Facebook and LinkedIn.