When you imagine your retirement, what does it look like? Is it filled with images of you enjoying a new stage in life where you get to do all those things you never seemed to have time for in your working years? If you’re like many American adults, you’re probably too busy to spend much time thinking about retirement at all. In fact, you may not even have the foundation for the type of retirement plan you’ll need to enjoy even a minimum level of comfort during your retirement years. If that’s the case, then it’s important to know just how vital a sound retirement plan can be for your future.
The fact is that fewer than half of all American adults have more than $10,000 in retirement savings. And make no mistake: that $10,000 won’t finance even one year or retirement. Millions of Americans have no retirement plan at all, no savings, and no options other than Social Security. That means that their retirement won’t be an open-ended period of new discoveries and second-chances, but a struggle just to survive. It also means that there’s little chance that they’ll have enough money to fund their retirements and leave a legacy behind for their children and other loved ones.
The Elements of a Sound Retirement Plan
It’s sometimes difficult to remember a time when most Americans had solid retirement plans. There was a time when millions of Americans could rely on three main sources of income during retirement: a comfortable employer pension plan, retirement savings, and Social Security. Together, those three elements provided many American retirees with comfortable retirements and the wealth they needed to secure a worthy legacy for their families. Sadly, those days are no more.
Since those days, the bond between employer and employee has changed in dramatic ways. Most people no longer stay with the same company for most of their working life. Companies rarely provide the kind of lavish pensions that were once far more widespread. Instead, employment is more fluid, as people move from job to job throughout their lives. That’s made that old retirement model less relevant than ever before.
Today, the retirement picture is a far cry from that provided for in prior generations’ social contract. Without widespread pension plans, many employees count themselves fortunate if their employers provide employer-sponsored 401(k) retirement plans. Personal savings are still an option too, but few Americans have stored away anything close to the amount of savings wealth they’ll need later in life. The one constant has been Social Security, but it’s a poor option for retirement without those other components to bolster its effectiveness.
So, what do you need to ensure that you have a viable retirement plan that can meet your needs in the Golden Years? Since you cannot rely solely on Social Security, your plan should be made up of safe investments that can increase in value over time:
- A 401(k) plan if your employer offers one. These plans can do wonders for your nest egg, so if your employer provides the option you should take advantage of the opportunity. More importantly, be sure to try to max out your contributions – especially if you’re fortunate enough to have an employer who matches them. That can effectively double your contributions each year.
- If there is no 401(k) option where you work, that doesn’t mean that you can’t have a retirement plan that is similar to that type of account. The individual retirement account doesn’t allow you to contribute as much each year, but it’s still a great vehicle to use when those employer-based plans aren’t being offered. Just be sure to do everything that you can to maximize your IRA contributions each year, to ensure that you get that nest egg in place
- Analyze your spending and evaluate your priorities. Few of us have the luxury of wasting money in the present without sacrificing something later in life. If you want to enjoy a comfortable retirement, you will probably need to rein in unnecessary spending now. Remember, your goal should be to maintain your current lifestyle in your Golden Years. For many of us, that’s impossible unless our current lifestyle is moderated to some degree. Make the hard choices now so that you can enjoy the fruits of your labor tomorrow.
When to Start Planning
The best time to start your planning is early in your working years. Building a nest egg for retirement requires not only your savings, but time and compounded interest as well. Few people can ever save enough money to sustain themselves later in life. However, you can maximize those savings by beginning early and allowing compounding principles to grow those savings over the course of thirty or forty years. That’s how you get from four or five thousand dollars a year in savings to many hundreds of dollars in retirement funds in your senior years.
Coordinating with Your Estate Plan
It’s also critical to ensure that your retirement plan is in place when you’re developing your comprehensive estate plan. Without a retirement plan, you’ll have no savings to fund your post-work life, and nothing to leave behind for your heirs. If you’ve created an estate plan but have yet to map out your path to retirement, it’s important to do so. It’s the only way to ensure that you have the financial stability you need later in life to make that estate plan work.
With the right amount of time and a commitment to contributing to your own future, you can avoid the negative consequences that result from a lack of a sound retirement plan. The good news is that you don’t have to handle these concerns on your own, as there are experienced professionals committed to helping you with all these important issues. At Robert J. Kulas, P.A., Medicaid & Estate Planning Attorneys, our retirement planning team can assist you with the creation of a retirement plan that will ensure that you meet your post-employment retirement goals. To learn more about how we can help you with these critical concerns, contact us online or call us today at (772) 398-0720.
