Retirement rundown

Let’s talk retirement, shall we? Experts would suggest you might spend 25-30 years in retirement and that you may need between 80%-100% of what you spend now during your retirement years. That means saving for your future should be a priority as early as possible to reach your retirement goals.

Retirement savings is, quite simply, an account that helps replace your income when you retire. Retirement plans are often offered by an employer; your employer may have certain requirements you have to meet to become eligible for the plan, such as reaching a certain age and/or length of employment. Being salaried vs. hourly can be a variable, as well. Once you become eligible, you can start contributing to the retirement savings account offered.

There are several types of retirement plans, and every employer has different details included in their plans; however, all retirement plans have specific regulations the IRS puts in place.

Types of retirement plans

There are many options available to help you start saving for your future. These are the most common:

• 401(k): Company-sponsored retirement plan.
• 403(b): Retirement plan for nonprofits, government entities, and schools.
• 457: Supplemental plan that allows extra savings.
• Pension: An account in which money is deposited while you’re working that you can withdraw from later. With a pension, you’ll receive guaranteed amounts of income in retirement.

Components of a retirement plan

Most retirement plans share a set of common components for contributing, investing, and compounding your retirement savings. Some of these include:

• Your contribution: Contributions are deposits made directly from your paycheck into your retirement plan.
• Employer match: An employer match is a contribution made on your behalf, by your employer, that matches all or part of the contribution amount you put in.
• Profit sharing: A share of the profits from your employer deposited into your retirement account.
• Investments: Investing long term gives you the benefit of compound earnings and long-term savings. There are a number of different ways to invest for retirement; however, it’s smart to talk to a professional before you begin investing.
• Compound earnings: Interest, or earnings, calculated on the original amount invested and on accumulated interest of previous investment periods. Ideally, compound earnings will snowball over time.

A good rule of thumb is to save between 12%-15% of your paycheck toward retirement. Often, saving for retirement may seem like an unreachable goal when current finances are tight. But remember, a little may go a long way: Because of compound earnings, your small contribution now could potentially turn into a healthy balance by the time you retire!

Consider saving now, even if you start with a small amount. Increase your savings over time to reach your goals. The sooner you save, the higher your account balance will be in your retirement years — so you can enjoy the retirement you worked hard to earn.

For more information on retirement plans, or to get in touch with the Retirement Education Team, give me a call! I’m happy to help point you in the right direction.