The concept of retirement is a bit of a historical anomaly, as most people in the history of civilizations were not fortunate enough to have a period of their lives dedicated to phasing out of labor and into permanent leisure. We are grateful to live in a time and a place where this is a very real and achievable scenario. However, there are challenges and concerns that many of us face today regarding the viability, possibility, and management of funds when it comes to saving for retirement. These concerns are valid and very relevant for anyone who is uncertain as to what their future (or current) retirement picture will look like.
There are two main needs for the funds that you would use in your retirement: Everyday living as the first, and recreation as the second. Most people would hope that their retirement funds would allow them to experience a good amount of both, but what you expect to be able to do is the cornerstone of what “enough saving” will look like. Two people in different parts of the country with very polar wants and needs may have drastically different retirement savings expectations. At the bare minimum, you should expect for your retirement funds to cover your basic living needs, such as housing, food, clothing, transportation, taxes, and any medical needs that may not be covered under Medicare. This is difficult to truly project, so to be on the safe side, saving more rather than less is preferable.
After hearing that you should save at least enough to cover basic living needs, one may ask, “okay, so how much should I set aside, and where should I put it?” This is where a financial advisor can come into play. There are numerous types of retirement accounts – 401(k), IRA, 403(b), 457(b), TSP, and the list goes on. An advisor can walk you through which ones you may have or qualify for. Many accounts are tax-advantaged as well; lawmakers want to incentivize Americans to save for retirement and that is their means of doing so. Many retirement accounts are deposited into by employment withholdings, meaning that you don’t even have to worry about putting the money into them manually. If your employer offers a “match” of your contribution up to a certain amount, make sure you are contributing at the very minimum up to the match amount. Now the question is, “How much?” A common benchmark for retirement savings is 15% of your gross income, meaning 15% of your pre-tax salary. This is a sweeping assumption, but it is applicable to many employees. The more you can save for your retirement without severely compromising your current lifestyle, the more you will be able to do once you reach your golden years.
Retirement is a serious matter that a strong financial advisor can greatly assist you in projecting and preparing based upon your needs, wants, and timeframes that may be unique to you. Always remember that planting good seeds today can allow for a great harvest in your future.