Retirement Chat: Best practices and milestones

Saving for retirement is one of the most important things we can do for our futures, but many of us have the same questions about how to get there. How much should I save? By what age should I be hitting certain savings milestones? And what else should I be saving for? Well, you’re in luck, as a few of our experts from our Retirement Plan Services education team held a recent discussion about those topics and more. Check out our first Retirement Chat audio blog.

Audio transcription:

Jason (host)

Hi everyone. Welcome to the first episode of Retirement Chat. We're excited to kick this series off and throughout the year, every quarter, we're going to be discussing some key topics related to savings for retirement. The idea here is to just to build on a foundation of information, to help you understand your retirement plan, and to help you reach the retirement, the type of retirement, that you envision for yourself. Today, we're going to be discussing just savings in general. I am your host, Jason, and I'm here with two guests: I’m very excited to introduce Geoff and Jeff, two dedicated financial educators within the retirement plan services department at UBT. Thanks for being here, guys.

Geoff and Jeff

Thank you. No problem.

Jason

Let's get started with you, Geoff with a G. What should people consider to be like a good savings goal for retirement, maybe a certain percentage?

Geoff

Well, I mean, it's a good question. And the one thing I'd first say is that it's not really a one-size-fits-all answer. Everybody's going to be in different stages of their life regarding time horizon, and what would be appropriate to save. But if you're looking for a real basic idea of a baseline goal that you want to go with, I would say at minimum, you want to at least try and maximize any free dollars that you can get out of your company's retirement plan, whether that's in the form of a match or some sort of company profit sharing contribution. Step two would be if you're looking for your goal to be in the range of just providing a good retirement account balance on average, experts want you to save anywhere from 12% to 15% annually, give or take. And that 12 to 15% number does tend to scare a lot of people because that's a lot of money to come right out of your paycheck, and we understand that.

But what a lot of people don't realize is that that 12 to 15% it does include employer contributions in addition to the money that you put in personally. So if you're putting in a specific dollar amount or a specific percentage out of your check, just know that you can factor in any free money from your employer in addition to that. So that really helps making it to that 15% goal, just seem a little bit more attainable to the average investor.

Then the last part that we always talk about is just take your time — baby steps. We understand that putting a chunk of change into your retirement account all at once can be a little bit daunting and a little bit intimidating, and just know that you are able to slowly increase these things over to time, whether that's through auto-acceleration or increasing that dollar amount yourself out of your paycheck. That can be the difference between tens to hundreds of thousands of dollars over the life of your investment. So max out your free dollars, get into that 12 to 15% savings range, and then just slowly work your way up. And you'll find that, you know, it's not as intimidating as it might sound right off the bat.

Jason

That sounds good. Thanks, Geoff. Just to follow up real quick — just because that 12 to 15% — I'm just going to assume you can say yes or no — that may or may not be enough for somebody, right? Everybody has their own personal story, I'm assuming, so that's just sort of an arbitrary number, right?

Geoff

Absolutely, yes. So if somebody's younger, 12 to 15% might work out, but if you're a little bit behind and you're knocking on retirement’s door, you may need to put a little bit more towards your retirement account, and that's why it's not a one-size-fits-all equation. You just adjust for your own personal situation.

Jason

That makes total sense. Thanks, Geoff. Yeah, so Jeff with a J, beyond the annual goal, the percentage goal, are there any checkpoints that folks should point to and look to, maybe long-term savings goals? I guess, how do people determine for themselves, in their own personal situation, what their goals should be?

Jeff

Yeah, there are definitely some checkpoints or benchmarks out there that we usually use when someone asks us, “Hey, Jeff, am I on track for retirement?” Some of the more common ones that I find in articles and that we reference a lot are from Fidelity. And the general one you want to get to at the end is to try to have 10 times your salary saved by the age of 67. And again, that's whatever my salary is at age 67, I want to make sure I have 10 times that saved. The savings goals that Geoff was talking about earlier, that 12 to 15%, does kind of help you hit certain benchmarks along the way; they do kind of start around age 30. So at age 30 you would want to have one times your salary saved for retirement already. And then they kind of go in every five years, you know, 35, 40, 45, and so forth.

Those are kind of the more common ones that we use, that we see, again, when people ask a question, “Hey, am I on track for retirement?” And again, Fidelity is the most common one I see, and they're not set in stone. So when we see that 67 age and I need to have 10 times my salary saved there, you know, it's not set in stone, it can fluctuate depending on how much I make. Am I single? Am I married? Those sorts of things. And then also, what type of lifestyle they want to have in retirement. So if I'm wanting maybe to have a little bit less in retirement to do a little bit less, maybe that 10 times isn't needed, maybe I only need nine or eight, those sorts of things. So it definitely can vary. So if people are behind on some of those, we just let them know it's not the worst thing in world. It just kind of comes down to whatever they like to do in retirement.

Jason

Awesome stuff. So, you know, going back a little bit, in conjunction to what Geoff with a G said, a million dollars isn't necessarily the goal for everybody, right? Cause we hear that a lot. Is that arbitrary? Well, I do, I need a million dollars. And what you're saying is, it's more personal — this is a more personal approach to that. Is that right?

Jeff

Right. Yeah. A million dollars isn’t going to work for everybody. Really what we're looking to do when we get to retirement is replace the money that we're making throughout our career. And you know, some of us aren't making maybe $250,000. And so we may not need the million dollars by the time we retire, if we're making a lot less, you know, I'm living off less. So a million dollars might be way too much for me. So again, I don't need that much. Iit's never really like a hard number that people have in their minds, of a million dollars. That's what I need. Sometimes you can have quite a bit less and be able to do all the same things that you did while you were working.

Jason

Super important stuff.

Geoff

If a million dollars is too much for you, Jeff, you can throw some that way for me, if you want.

Jeff

Be happy to.

Jason

Back to you, Geoff with a G. So are there different types of — I've heard different types of savings, right? There's different tiers or, so to speak, something along those lines. Could you just let our listeners know, there are different levels of savings that they should be thinking about and considering, along those lines.

Geoff

Yeah, definitely. So it's like a three-tiered system, kind of what you just said there. Your first step, your tier would be, I would say, an emergency fund. That should be your number one priority to start off. We get it, things happen, emergencies happen, whether it's medical emergencies, a home expense or a car expense, those things do come up and you need to have some funds set aside to be able to pay for those type to things. So we would say anywhere from three to six months’ salary saved up would be ideal, just to float you through some of those difficult times. So definitely having a savings or emergency fund would be a considered a short-term goal.

From there you really want to just figure out what your real values are. What's most important to you towards saving after that? So you've got mid-term goals from there. Mid-term goals would be saving for, maybe a down payment on a home, or even a 529, which is a college savings vehicle that you can use to save for a child or even a grandchild's future college costs.

After that, you move on to step three or tier three, which is more of a long-term goal, and these are retirement savings accounts. So whether that's your company-sponsored retirement plan, a 401k, or a 403b, or maybe even an IRA — something that you would set up outside of your company sponsored plan, those are the different tiers.

Those are really what you want to shoot for, all the different types of savings vehicles that you have access to, saving for emergencies is probably number one. And then after that, we would say, what is most important to you at that point? So there's no right or wrong way to do it. It's just what’s for your own personal situation, just tailor those savings to that, where you're at in life.

Jason

But you're saying that the emergency fund should, would be the first priority if we're going to prioritize something that's going to be your first priority?

Geoff

Absolutely. Yep. I mean, you know, things happen, times change, emergencies happen. That's probably one of the most stressful things is when something like that comes up and you want to make sure that you're ready for it because that's happening then, and now mid-term goals, long-term goals, those are farther down the road. The stressful part is what's happening right now, right in front of us. And you need to be prepared for that to kind of alleviate some of that stress.

Jason

And being prepared is as I'm sure as you guys are financial educators and retirement plan world, you don't want people to dip into their retirement plan. So that's another reason why I would assume why we'd want to have an emergency fund.

Geoff

Absolutely, yep. Because you don't want, you want something like that to be a last resort option. You want to be able to be ready and just have those funds ready and set aside for you.

Jason

Makes total sense. Thanks, Jeff. Yeah,

Geoff

No problem.

Jason

So let's come back to you, Jeff, to wrap this up with one final question. What resources does UBT have that people can utilize to help them reach their savings goals?

Jeff

Yeah. UBT has a lot of resources if participants or anybody goes to, ubt.com/rps. There's a Learning Center tab that they can click on that has a lot of different areas that they can go to. But if they go to the retirement planning area, we have a lot of articles on there, videos, a lot of different, helpful information, I think, for participants to learn on a lot of different subjects. And a lot of the stuff is fairly short, which is kind of nice, so you don't have to take a lot of time out of your day to be able to do that. But yeah, our website, ubt.com/rps is going to be the starting point there. And then, like I said, the Learning Center is going to have a whole lot of information for them to learn about. And we're constantly trying to add new content to that all the time as well.

Jason

Sounds great. Are there any calculators or anything like that on there, that people can utilize?

Jeff

We do have some financial calculators on there. A couple of the ones that I use probably most often are the 401k savings calculator, where you can add how much you're contributing to your retirement plan, any company contributions that you might have, those sorts of things. And they'll kind of tell you you'll have X amount of dollars after 15 years. Then there's also one of “how long will my retirement dollars last?” which is a really good one. Those are probably two of the most popular ones that we use.

Another one for me personally, I like to use the contribution accelerator, where it can kind of show if I start at 5% today, but then I increase my contribution percentage, maybe one percentage point each year, like Geoff mentioned earlier, to maybe try to get up to that 12 to 15% range or even higher. It really shows you the benefits of increasing that yearly, and what it can do for you compared to, if you just stayed flat at like a 5% contribution your whole career. So those are some really good financial calculators that we like to use a lot with participants.

Jason

Yeah, it sounds like there's a lot out there for a lot of people to tap into. So as we wrap this up today, main takeaways, from what I'm gathering, some of the main takeaways are obviously we want to make sure that people have maybe a 12 to 15% goal, as far as their retirement savings is concerned, including any contributions that their company may or may not give or may give that would be included in there as well.

And then of course, everything is personalized, right? You guys have shared stories about how these are personalized situations. So not every number is necessarily going to coincide with everybody's situation. Not one-size-fits-all as I think one of you guys said, which is perfect. And the other thing is to sort of have some categories as far as savings is concerned, but certainly the most important probably, to start with, is that emergency fund, correct? And then there's obviously a ton of resources out there that our folks can tap into to help them reach their retirement goals. Is there anything else that you guys would like to add?

Jeff

I think touching base on what you said, one situation is not going to fit perfect for everybody because we're all a little bit different. We make different amounts of money. We have different needs in our lives and what we want to do. So kind of going back to that million dollar example, that is going to be maybe perfect for one person, but, you know, we're all a little different. When I go to orientations with different companies, I tell people, we want to talk about the benchmarks. We have 60 people here, or 30 people here, everything's going to be completely different. So I think that's really kind of the biggest takeaway is not really try to get caught up on what other people are doing or what you hear. Other people may have saved, because that may work for them, and your situation's going to be a little bit different.

Jason

That's a great point. Thanks, Jeff.

Geoff

Saving is the most important thing, period — so something is better than nothing. So don't get discouraged if you're not on track with any of those goals that we talked about, just keep plugging away and you'll do just fine.

Jason

Fantastic. Another great point. Thanks Jeff, thank you guys.

As we close, I just want to thank everybody for joining our conversation here today. And just remember that here at UBT, your money has people and we are always here to help. Thanks, everybody.

Please keep in mind that the information that was provided here is for informational purposes only — as educators, we're able to give you education, we are not able to give you financial advice. This is strictly for your information only.