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The number of Americans 55 and older deciding to retire is growing, with about half of people that age choosing to step out of the workforce, according to Pew Research.
Still, some are returning to the workforce as inflation and bumpy markets squeeze their nest egg. This may leave you wondering about your own retirement plans, regardless of your age.
The sooner you start planning for retirement, the more your money works for you thanks to compound interest, noted Danielle Harrison, certified financial planner and founder of Harrison Financial Planning in Columbia, Missouri.
“When you start saving as a young adult, time is on your side. You can start setting aside a small percentage of your salary, let funding do the heavy lifting, and be well prepared for retirement,” Harrison said.
While it’s never too late to start, the longer you wait, the more you’ll need to save to meet your retirement goals, Harrison noted. In the meantime, you’re “wasting years of capitalization,” Harrison said. “The percentage of your salary that you need to spend on retirement savings is increasing dramatically.”
That’s why it makes sense to start right away. Start earning more money from your savings and progress towards your retirement goals.
And, if you think you’re already late, don’t be discouraged. Many factors determine how much you can set aside for your retirement. Your current financial situation, timing of retirement, potential investment returns, anticipated lifestyle, and related living expenses (including anticipated medical care) all come into play.
A common goal for annual retirement is to secure at least 80% of your work income. Consider automatically depositing a fixed amount into an account of your choice. In addition to a 401(k) or retirement plan, most experts point to IRAs (both traditional IRAs and Roth IRA) as well as personal brokerage accounts as other means of building wealth.
If you don’t have one, a Roth IRA could help you reach your retirement goals. Start exploring your options today.
However, the strategies and options depend on both your age and how much you need and want to retire with.
What is my best retirement strategy by age?
“There’s the old adage that ‘the best time to plant a tree was 20 years ago. The second-best time is today. “The same goes for retirement savings,” Harrison said. “You can’t go back and change your past savings behavior, but you have the power to start today and make a real difference in how your future self will live.”
Whatever your strategy, “make sure the investment allocation within your retirement savings portfolio matches your personal risk tolerance,” Martin A. Scott, CFP and founder of Lasting Wealth Principles told Freehold. , New Jersey.
Carefully review the fees associated with these investments, Scott added.
Here are some strategic tips by age group:
- 20s: Automatically set a small amount for retirement from each paycheck. If your company offers a 401(k) or equivalent (especially if they offer “matching” funds) then contribute the maximum allowed if you can.
- 30 and 40 years old“People in this age bracket still have about 25 to 30 years before they retire, so there’s still a long enough time horizon to accumulate wealth for retirement,” Scott said. Harrison suggested reassessing every year and not waiting for your kids to graduate. This age “may be the perfect time for individuals to make big strides towards their retirement goals if they haven’t already.”
- 50s and 60s: Regularly review your retirement savings and investments. Some experts recommend switching to 50-60% lower risk investments as you approach age 65.
- 65 and over: As you approach 70, reduce equity funds to 30% of your portfolio. If possible, consider waiting as long as possible to start collecting Social Security.
Not sure of the best way to go? You can also talk to a financial adviser who can make recommendations based on your personal situation.
How much money should I have saved for my retirement at what age?
The amount of money you have saved for retirement varies by age. Fidelity Investments, a leading investment and financial services company, recommends these general goals for individuals:
- 30: Your annual salary
- 35: 2x your annual salary
- 40: 3x your annual salary
- 50: 6x your annual salary
- 55: 7x your annual salary
- 60: 8x your annual salary
- 67: 10x your annual salary
Let’s say you earn $75,000 a year at age 30. You’ll need to save $225,000 at age 40, $450,000 at age 50 and $600,000 at age 60, according to Fidelity calculations.
However, everyone’s situation is different when it comes to retirement savings. Variables include unexpected income and expenses, overall financial goals and potential health issues, Harrison noted.
“Typical rules of thumb for how much an individual should have saved for retirement tend to focus on having ‘X’ times their income saved at each age, but I think that’s drastically different for each individual’s situation,” Harrison said. .
Don’t neglect life insurance and other financial protections
Saving for retirement, while a crucial part of ensuring successful golden years, is only part of smart financial planning. Retirement savings, after all, are yours to spend and live on after you retire. But that doesn’t necessarily mean you’ll have enough (or should even plan to have enough) to leave your family when you die.
This is where life insurance comes into play. Life insurancewhether it be integer term Where another guy, can offer unique and secure financial protection. By making a relatively inexpensive payment to a provider each month (depending on your billing schedule), you can ensure that your beneficiaries will receive an agreed lump sum upon your death. Life insurance can be cheap or it may be a bit more expensive, depending a variety of factors.
But what almost all financial advisors agree Sure is worth having. So if you are currently looking for life insurance or just want increase the coverage you already havethis is the right time to do so. You can start by getting a quote today.
What if I need money now?
While it’s generally not beneficial for older people (or those approaching retirement age) to take on new debt, they do have some options for freeing up cash. Here are three to know:
- Life insurance: Whole life insurance policies offer policyholders the ability to collect part of their policy use in their lifetime. Just note that if the amount deducted is not refunded, the payment amount will be the agreed sum minus any deduction made during the policyholder’s lifetime. Learn more now.
- Refinancing by collection: That’s when a landlord comes out a new loan more than their current mortgage balance. They then use the new loan to pay off the old one and keep the cash difference for themselves. The refinance will fully replace the existing mortgage. Borrowers will repay it monthly, plus interest, until the loan is paid off. Learn more now.
- Reverse mortgages: This variant is only available to owners age 62 and older. Homeowners who have fully paid off or paid off most of their mortgage then take a portion of the equity in their home. This would be considered non-taxable income. It must be repaid, however, if the owner dies or chooses to sell the home. Still, it may be worth pursuing if the money is needed. Learn more now.