If you’ve followed along with our 12 Months to Financial Fitness series, you have some solid money goals and organized finances. As a result, it’s time to start considering your retirement plans, even if retirement is a long ways away. Do you know at what age you want to retire? What kind of lifestyle you want to have? Read more below.
Why You Should Start Retirement Planning Early
While social security will provide some income during your retirement, it likely will not be enough to cover your expenses and other retirement goals. For example, if traveling the world is part of your retirement plans, you will definitely need extra savings. You also need to think beyond just normal expenses like groceries and utilities, and about others like family vacations, presents and other extraneous purchases that you may not currently be able to forsee, but should prepare for nonetheless.
No matter what life stage you’re on, retirement should be part of your financial plans. The earlier you start, the better off you’ll be! While you can still manage to save for retirement at an older age, consider that just 22% of Americans believe they have enough saved for retirement.
Where Does Retirement Income Come From?
The simplest way to have money for retirement is to save some each month, but there are issues with this strategy. Your money is more susceptible to the dangers of inflation. Say you have $50,000 sitting in a savings account with a basic interest rate. If ten years passed, that $50,000 will have likely grown some, but will ultimately have lost some purchasing power.
Additionally, you’ll miss the potential benefits of investing a portion of that money, which typically has better results than leaving it in a savings account. These investment options include stocks, your 401(k) and CDs, money market accounts and IRAs! Beyond investing, there are other sources of money for retirement, like pensions and inheritances.
If you have a 401(k), are you maxing out your contributions, or at least enough to take advantage of your employer match? Contribution matching allows you to get the most out of investing in your 401(k). Keeping contributions high early on will pay off in the decades to come. If you're unable to increase your contributions, consider re-evaluating your budget and see if there's a way to raise it without compromising another part of your of your financial planning. It's certainly a balancing act, but one that pays off!
Do I Have Enough for Retirement?
While we wish we could answer for you, only you can know if you have enough to retire! Like mentioned above, this correlates with the kind of lifestyle you want to have, and the amount of money it costs you to keep up that lifestyle. Some retirees develop a plan to live off of just their savings once they retire, while others are more open to picking up part-time work to supplement their income.
Whatever your choice, make sure that you re-evaluate your retirement plan on a consistent basis. Life changes mean financial changes, and you need to make sure your retirement plan evolves with you through each stage of your life. If you’d like someone to talk to about retirement planning, our FCU financial advisors are always here to help!
Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teachers’ Credit Union, FCU now services over 135,000 members in 48 counties throughout North and Central Florida. For more information on the services we provide, visit FLCU.org or call us at 1-800-284-1144.