Retirement may seem an eternity away; however, even if it’s a dream 20 years down the road, saving for retirement shouldn’t wait until the goal is in sight. Rule of thumb says you’ll need $1,000,000 in savings to retire comfortably. Our experts at First Security State Bank recommend taking the following steps to save with the future in mind:
- Determine when you want your $1 million. The typical age of retirement is 65, but you may be shooting for a few years earlier or later. Whatever the age affects how much you need to save each month, so calculate years left to save based on current age and breakdown monthly savings requirements thereafter.
- Start saving ASAP. Compound interest rewards those that begin saving earlier rather than later. A $10,000 investment at age 25 could yield tens of thousands of dollars more by 65 than if that same $10,000 were invested at 35.
- Spend less than you save. It’s basic math. You’ll have money left over only if income exceeds expenses. Buying a home within your range, purchasing cars secondhand, and paying for vacations out of savings and not on credit protects you from dipping into debt.
- Opt for automatic. Research your employer’s 401k or retirement-based plans and determine what percent you’d like funneled from your paycheck and into your savings. If your employer matches contributions up to a limit, work to reach their maximum to maximize your savings.
- Save beyond your 401k. Expect the unexpected. A flooded basement or dying car engine can send you spiraling out of your financial plan if you haven’t budgeted for rainy days. Set up a $1,000 emergency fund as soon as possible, and work to expand it to anywhere from 6-12 months of income to protect you from larger surprises, like medical issues or unemployment.
The road to a million takes time and discipline, but it’s exceedingly possible. For further savings strategies and investment options, make an appointment today to meet with one of our trained financial advisers.
Have you thought about retirement? Take our quiz to find out how much you know!
If you are 50 or older, it is time to start thinking about your exit from the working world. The sooner that you start planning your retirement strategy, the more time you will have to explore all the different options you have and take the necessary actions. The question is “Are you really ready to retire?” Ask yourself these questions to find out!
- If you were born between 1943 and 1954, what percentage of your full Social Security benefit will you lose if you collect at 62 when you are eligible, rather than at the normal retirement age of 66?
- If you retire at 66 and inflation over the next 25 years averages 3 percent, how much buying power would you lose by the time you are 91, without inflation-adjusted cost of living increases?
- One third of your buying power
- More than half
- Retirement savings must last the rest of your life. What are the chances that at least one member of a 65-year-old married couple will live to be over 92?
- To make sure that you don’t outlive your savings, what’s a good rule of thumb for annual withdrawals?
- Don’t touch the money until you really need it
- Restrict your withdrawals to 4 percent of your savings during the first year of retirement. Increase withdrawals to keep pace with inflation in the future.
- Withdraw the money only in case of emergencies.
- How much should a 65-year-old couple retiring today expect to spend on out-of-pocket healthcare costs throughout their retirement years?
- The average cost of a private room in a nursing home is around $81,000 a year. Who covers that cost if you need care?
- Your health insurance
- You do, unless you have special long-term care insurance
So how did you do? If you got most of the questions right, way to go! You are off to a good start toward your retirement goals. If you think you have some work to do, let First Security State Bank help! We offer an online retirement calculator to help you figure out what it will take to create a secure retirement. We want to help you feel confident and secure in your later years. Contact us today!