Some people plan for retirement all their lives. But many Americans do little or no planning for retirement. In fact, for some, the first real discussion of retirement comes when they go to see a financial planner a month before retirement.
A good financial planner will tell you it’s never too early to start retirement planning. Some will tell you it’s never too late, as long as you lower your expectations.
But, according to planners, a good time to start getting your ducks in a row might be when you are in your 50s, or at least ten years before you plan to step out into retirement.
Still, older workers aren’t prepared for it. The median savings for workers between 50 and 55 years old is only $8,000, according a report by the Economic Policy Institute. For Americans between 56 and 61, the median savings is not much better – still only $17,000.
“It is critical for people to understand they’ve got to have a plan for retirement,” says David Blackston, founder of Blackston Financial Advisory Group in The Villages, Fla. “They need to know how much it will cost to retire. A lot of people today are working jobs that don’t provide pensions. They have to provide income in retirement.
“You need to put the pedal to the metal,” he says. “You need to maximize your 401(k) plan. If you company matches five percent and you don’t, you are crazy.”
Alicia Lewis, co-founder of Layman Lewis Financial Group in Loveland, Colo., says ten years before retirement is a great time for retirement plan. “When we talk to people 10 years from retirement, they are in a great position to be able to plan with a retirement specialist,” she says.
“There are things they might want and need to do,” she says. “You may need (401(k) or IRA) catch-up. We look at the debt and try to get it paid off, especially credit card debt. We look at the mortgage. When is that getting paid off? Do we want to accelerate that?”
Working with a financial planner should be at the top of your to-do list at this point.
“A lot of people realize that when you retire you could live another 30 years,” says Blackston. “That’s 30 years without a paycheck. Working with someone who can help you get through retirement is important. A lot of financial advisors can get you to retirement. Not many can get you through retirement.”
Lewis, meanwhile, says it’s also the perfect time for couples to start budgeting. “When you are in 50s, people are making more than they spend. They don’t have a budget. It’s a perfect time to start budgeting and seeing how much I am spending, what am I spending it on, and do I want to continue this spending or hone it in and retire early.”
Blackston says it’s also time to properly plan for taxes and retirement income. Most people forget that they have to pay taxes on traditional 401(k) when they begin withdrawing money.
“Your 401(k) is not tax-free, but tax-deferred,” Blackston says. “You may have $1 million in your 401(k), but it’s not really that. It’s only about $600,000.”
Blackston also says many people think their expenses will be less when they retire. “That’s bunk. In Florida I see an epidemic of 70-year-olds and older filing for bankruptcy.
“Social Security was never designed to be total retirement income,” he says. “It was designed as a supplement. People come down here (to Florida) and all they have is Social Security. People have to start planning now. When your mom cooks turkey at Thanksgiving, she doesn’t put it in the microwave. She puts it in the oven, so it can cook.”
This article is for informational purposes only and is not intended to provide any specific financial, tax , or legal advice. We encourage you to seek qualified financial, tax, and/or legal professionals for your needs.