Preparing for retirement
Did you know that only half of Americans have calculated how much they need to save for retirement, according to the U.S. Department of Labor?
Retirement takes plenty of planning and consideration. Not only do you need to think about when and where you’ll retire, but you’ll also need to consider your finances. Putting money away is important if you want to have a successful retirement.
Consider some of these steps to help you live the retirement of your dreams that’s fulfilling and financially stable.
Ask yourself questions
As you plan for your retirement, consider these questions:
- At what age do you plan to retire?
- Can you participate in an employer’s retirement savings plan?
- If you have a spouse or partner, will they retire when you do?
- Where do you plan to live?
- Will your medical insurance stay the same or change?
- How will you spend your time and what do you want to do?
- What does your monthly budget look like in retirement?
- How much do you anticipate spending annually?
- How long will your current retirement savings last you?
Start saving and keep saving
If you are saving money for retirement or another goal, keep going! If you’re not, it’s time to start. You can start small and then increase the amount you save each month. Prioritize your savings goals and make saving for retirement at the top of your list. Develop a savings plan, stick with it, and set your goals. Remember that the sooner you start, the more your money has time to grow.
Pay off debt
Try to pay off your debt before retiring. Pay off your higher interest rates debt such as credit cards and any loans. One option is consider consolidating your high-interest debt with a home equity loan. Visit adkbank.com or your local branch for full details.
Build an emergency fund
Save at least three to six months’ worth of living expenses. This is just in case you need to rely on your savings to cover bills should you experience delays with your pension or Social Security payments. This emergency fund may also help with unexpected costs, medical emergencies, or an economic downturn.
Know your retirement needs
Plan ahead for your retirement. According to the U.S. Department of Labor, experts estimate you will need 70% to 90% of your pre-retirement income to maintain a standard of living.
Contribute to a 401(k) or IRA
Make regular contributions to a 401(k), individual retirement account (IRA), or both. According to the U.S. Department of Labor, more than a quarter of private industry workers with contribution plan access did not participate in 2020. If your employer offers a retirement savings plan such as a 401(k), sign up and contribute. You can set up automatic payroll deductions, and many employers may provide matching contributions. The money you contribute may lower your taxable income.
If your employer doesn’t offer a 401(k) or you’re self-employed, consider an IRA. Research the type of IRA that best suits your financial situation.
Don’t touch your retirement savings
Don’t be tempted to borrow money from your retirement fund. You’ll owe taxes on what you borrow, and if you haven’t reached at 59½, you’ll have to pay withdrawal penalties. If you change employers, it is recommended to keep your money in the current plan or roll it over to an IRA or your new employer’s plan.
Determine health insurance options
Make sure to research health insurance coverage before you retire. For instance, if you’re 65 or older, Medicare may be an option. It’s best to understand how your health insurance and its benefits will work.
Understand Social Security benefits
You may rely on Social Security benefits as a source of income when you retire. On average, the benefits replace 40% of pre-retirement income. Visit the Social Security Administration website for more details on your benefits.
The information is this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.