Are You Where You Need to Be in Your Retirement Saving?

With John Locke, CFP®, CLU, LPL Financial Advisor,
Mutual Financial Group

When it comes to retirement savings, there’s no magic number you have to hit.

How and when you retire depends a lot on your lifestyle and income needs. Calculators, like this one, will give you an idea of what to aim for, but ultimately, it’s up to you. Do you want to travel the world? Contribute to your grandkids’ college educations? Or just remain independent for as long as you can? Your individual plans affect how much you’ll need to save.

That said, it’s never too early to start incorporating retirement saving into your larger financial plan. The median retirement savings amount for families between the ages of 32 and 37 is just $480. For those aged between 56 and 61, it’s just $16,000. Regardless of your lifestyle or goals, that’s simply not enough.

So where, exactly, should you be?

In your 20s…

Look. I’m going to be real here. For a lot of people, your 20s are a financial wash. Whether or not you choose to go to college, you’re probably concerned with finding steady employment and finding your financial footing with entry-level wages. Not to mention paying for those milestone moments like weddings or first homes. Rather than worrying about retirement, focus your energy on getting (and keeping) your finances in order, including creating a budget, paying down debt and building savings for emergencies or job changes.

Focus: Financial Stability

Goal: Have the equivalent of half your annual salary saved by the end of the decade.

In your 30s…

As you enter your 30s, you’re probably not too terribly focused on retirement. However, strangely enough, the more years you work, the more you’ll start daydreaming of exiting the workforce. So, between having kids, changing jobs, or buying a home, at the very least, make setting up an employer-sponsored 401(k) and/or Roth IRA a priority.

Focus: Build Retirement Savings

Goal: Have a sizable amount saved toward your retirement goal by the end of the decade.

  • Set up your 401(k). If your employer matches contributions, start with whatever percentage that may be; if not, start with a 5% contribution.
  • Bump up your contribution.
    • You can contribute up to $18,000 per year to a 401(k).
    • Add 1% to your contribution each year (a good time to do this is when you get a raise) until you reach 15%.
  • Consider opening up a Roth IRA.
    • You can contribute up to $5,500 per year to a Roth IRA.
  • Make sure you have the appropriate amount of life insurance and disability insurance in place. These policies will help protect against risks that can derail your retirement plan.

In your 40s…

Your 40s are a strange time. You see retirement looming off in the distance, but it’s starting to creep up on you. Even with a mortgage or kids’ expenses to pay, it’s a good time to check your progress and adjust your investments, if needed. Ideally, you’ll have one-third of your retirement goal saved for retirement by the end of this decade (the actual dollar amount will vary based on your income needs and retirement goals).

Focus: Maximizing Returns

Goal: Have one-third of your retirement savings goal saved by the end of the decade.

  • Max out your 401(k) contributions and your Roth IRA contributions, if possible.
  • Reevaluate your portfolio to make sure you’re maximizing your returns.

In your 50s…

We’ve got some good news and some bad news. The good news is you’re getting closer to retirement; the bad news is time is running out to save. Now’s a great time to take a hard look at your budget, retirement savings and what you want your lifestyle to be when you leave the workforce. Weigh your ability to help your kids with their college tuition with where you are at with your retirement plan. It’s important to remember, your kids can always take loans out for their college education, but you can’t borrow money to fund your retirement. If you’re planning on retiring before the age of 65, be sure you have enough saved to cover medical costs until you become eligible for Medicare. During this time, you should also start planning for long-term care costs.

Focus: Reducing Risk

Goal: Have 90% of your retirement savings goal saved by the end of the decade.

  • Increase your contributions; past the age of 50, you can contribute an extra $6,000 each year to work-sponsored retirement plans and $1,000 more into your traditional or Roth IRA.
  • Transition your portfolio to investments with less risk.
  • If you’ve been diligent about saving, you can retire at 59 ½ and draw from your 401(k) or IRA without penalty.

Think about retirement saving as a marathon. You can’t realistically expect to jump out of bed one day run a marathon; it takes planning and training to go the distance. Whether you’re fresh out of college or a workforce veteran, it’s never too late (or early) to start a retirement savings and investment regimen. If you find yourself in need of a financial planning trainer, contact a Mutual Financial Group consultant and we’ll happily help whip your retirement savings into shape.

Disclaimer: Securities and advisory services offered through LPL Financial. Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. The investment products sold through LPL Financial are not insured Bank Mutual deposits and are not FDIC insured. These products are not obligations of Bank Mutual and are not endorsed, recommended or guaranteed by Bank Mutual or any government agency. The value of the investment may fluctuate, the return on investment is not guaranteed, and loss of principle is possible. Bank Mutual and Mutual Financial Group are not registered brokers/dealers and are not affiliated with LPL Financial.

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