Whether you are just entering the workforce or are counting down the days until your final departure, financial planning is key for saving for retirement. A huge part of a good retirement is having the financial independence to support yourself without worry, and saving money plays a significant role in this. Here are some tips for protecting assets and saving funds so you can have an ideal retirement.
Plan for Healthcare Costs
People are living longer than ever, but this increased life expectancy comes with its own concerns. As the body inevitably declines in old age, there will be certain healthcare costs that even the healthiest person will have to keep in mind. For example, a couple both aged 65 who retired in 2015 will need an average of $245,000 to cover the healthcare costs that crop up during retirement. The longer you live, the more the amount goes up. Look at various long-term-care insurance options, which are designed for elder-care situations. If your employer offers a health savings account, also take advantage of it while you can.
Plan to Work Longer
Specifically, this tip means you work until you reach full retirement age rather than trying to retire earlier. This lets you maximize benefits and income sources before beginning the transition to retirement. However, this sort of advice is often easier to say than to follow. You may find yourself out of work and unable to find a new position, or you might be in a job that you can’t put up with for the duration. Consider looking into more satisfying job options within your company and see if a transfer is possible. This may result in a pay decrease, but it may also be better to be satisfied and less stressed than stuck whittling down the clock in a position you can’t stand.
Set Up Automatic Contributions
A 401(k) is an easy way to place money regularly in a savings account, keep it secured, and build interest for your retirement. When it comes to money saving, starting 401(k) contributions early is best, since little amounts build up over decades. A mere $50.00 off your pay twice a month over 30 years (at six percent interest) will net you almost $100,000 by the time you retire. This isn’t even counting employer-matching features, either. The general rule of thumb is to stow away 10% of your income for retirement, though such a large portion may not be feasible for everyone. In these instances, three to five percent is a good place to begin until your financial situation improves.
Consider an IRA
IRAs are a type of retirement investment account that can sometimes be a better option than a 401(k) if it has high fees or offers no employer contributions. Depending on whether you are using a normal IRA or a Roth IRA, tax on the money deposited is either deferred until withdrawal or is irrelevant since the money is deposited after taxes anyway. Roth accounts in particular are useful for young people who have small salaries since they lock in the tax bracket used when a contribution is made. This keeps your taxes on Roth account earnings minimal, even if you later move to a higher tax bracket.
Stocks, Bonds, and Mutual Funds
The stock market can be tricky to navigate, but investing in shares or bonds can be a good way to build savings. A safer option, and one that requires less market savvy, is to look for mutual funds, which are investment pools of stocks and bonds that are overseen by a manager. Making a long-term investment in a mutual fund removes the need to study and analyze individual stock options and makes it easier to diversify investment. Mutual funds, like anything involving the stock market, are still not 100% risk free and so they should not be used as your sole method of retirement savings.
Look to LUSO Federal Credit Union for Retirement Savings Options
LUSO Federal Credit Union is a not-for-profit, member-owned financial cooperative dedicated to providing members with quality financial services and products. We at LUSO pride ourselves on serving the financial needs of our members and offering guidance on building and preserving retirement assets, as well as savings programs meant to help members build wealth for their golden years. These services and more are offered in Ludlow, Springfield, Chicopee, Westfield, and Hampden County, Massachusetts.
Feel free to contact our Ludlow branch toll free at 1-844-LUSO-FCU or our Wilbraham branch at 1-800-808-5876.
LUSO Federal Credit Union and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.