Preparing for Retirement

While balancing work, family, and friends, it can be easy to let certain financial subjects lie dormant in the “let’s think about that later” section of the brain. Saving for retirement can be one of those subjects, but it’s important to resist that tendency. Regardless of one’s financial situation, it’s always a good idea to evaluate retirement savings options. It’s never too late to start, or modify, a plan. Here are 5 ways to prepare for retirement right now:

1. Envision what retirement will look like.

Everyone views retirement differently. Some people want to use their retirement years to travel, explore the world, and do all the things they had never had time to do when they were working and raising families. Some people have more leisurely aspirations at home, and look forward to spending quality time with family, friends and neighbors. Others may be motivated to continue working, perhaps on a part-time basis, or start a business. Envision the type of lifestyle that retirement will bring, and build a budget that includes the expenses that will accompany that lifestyle. Assess this plan frequently, and modify as needed. As life changes, so should financial plans.

2. Assess current savings: How much is enough?

With a desired lifestyle in mind, and drafted budget in hand, it’s time to evaluate savings.

Are enough funds being reserved to support the desired future lifestyle? According to the U.S. Department of Labor, only 40% of Americans have calculated how much they need to save for retirement. To help answer this question, consider using a reputable online retirement calculator, such as the one offered by AARP. For tips on how to use online retirement calculators, check out 2 of the Best Retirement Calculators by Investopedia.

3. Evaluate contributions to employer retirement savings plans.

For those whose employers offer a retirement savings plan, such as a 401(k) plan, be sure to sign up and contribute as much as possible. According to the Employee Benefits Security Administration, U.S. Department of Labor, the benefits of doing this may include lower taxes, and an increase in the contribution from the employer. Compound interest and tax deferrals could have a significant impact on the amount of funds that ultimately accumulate. It’s worth exploring because a little research now could make a big difference in the future.

In addition to employer retirement savings plans, other options to consider include:

• Opening an IRA (Individual Retirement Account) to make tax-deferred investments to provide financial security in retirement. An IRA can be ideal for people who are self-employed, for those whose employers do not offer retirement savings plans, or for those who want to bolster their retirement savings.
• Investing in a CD (Certificate of Deposit) to earn a guaranteed fixed rate of return on contributions.

4. Determine if Social Security and pensions will be enough.

Many people discover that their Social Security benefits and/or pension are not adequate to meet their retirement goals, so they supplement with personal savings. For an estimate on future Social Security benefits, the Social Security Administrator provides an online Retirement Estimator. Keep in mind, this is just an estimate. The actual benefits could increase or decrease in the future.

5. Research all the options, and consult an expert.

When it comes to retirement planning, there’s no shortage of options for savings plans. Having choices is wonderful, but in this case, too many options can be confusing. To find the best plan, take a 2-pronged approach. First, start by researching retirement plans. Here are a few online resources to explore:

• Forbes:10 Retirement Accounts You Should Know About
• IRS: Types of Retirement Accounts
• Employee Benefits Administration, U.S. Department of Labor: 10 Ways to Prepare for Retirement
• Investor’s Business Daily: 5 Biggest Retirement Mistakes People Make
• CNN: Ultimate Guide to Retirement