Retirement Planning Through Life’s Stages

by Rodney Brooks

So, when should you start planning for retirement?

In your 20s, retirement just seems so far away that we just feel like we can put it off. And today’s Millennials are still feeling crippled by their college debt.

In your 30s, we are distracted by getting married, raising a family, and buying that first home.

In our 40s, we finally feel comfortable with our jobs, but there are other distractions, like college tuition for those children.

So, the question for financial professionals is: are there steps people should take at each stage of life to be prepared for retirement?

Jack Teboda, at Teboda & Associates in Elgin, Ill., says the pressure is now on people to take care of themselves. So planning is critical.

“People need to put away money for themselves,” he says, “not only in 401(k) or IRA, but in some cases, in a Roth IRA as well. Ideally, they should be putting a portion of their assets in both qualified and nonqualified accounts. Social security will more than likely not be around as we know it today, and people will be responsible for own retirement.”

“Regardless of age, it boils down to interest,” says Jeremy Keating, at Capital Income Advisors. “Some (people) are interested and fired up. Some people are interested at 20. Others are disinterested in 30 or even at 50. They think it’s difficult and confusing. It doesn’t have to be. They must need to make it more of a priority.”

So, here are the tips for your life stages.

If you are in your 30s.

“In reality, there is overlap,” says Keating. “If you are in your 30s, the key is to get debt under control. Get over the ‘I’m in my 20s and irresponsible.’ Get revolving debt under control live within your means. You need to make sure you are on track with savings and 401(k) plan. In the new generation, people don’t think they are an adult until 30.”

Keating says when you are young, get someone to help get you headed in the right direction, even if you have to pay an hourly or one-time fee.

He says he met someone who has had a financial advisor for 40 years.

“That made a big difference in his retirement plan,” eating says. “He got lucky. He met a guy in the early 1980s who got him planning regularly. Now he will be financially independent. Getting help can kick-start you in the right direction.”

The most obvious thing to do in your 30s is to contribute as much as you can to your retirement plan, says Kirk Cassidy at Senior Planning Advisors, Farmington Hills, Mich. “But when selecting investments for retirement, it may be wise to avoid actively managed mutual funds and use low cost index funds or ETFS. Because of high fees.

Also, “Invest aggressively and forget you even have it until you get close to retirement,” he says. “The point is invest aggressively in your 30s and leave it alone, don’t worry about it. For many of my clients, I also recommend buying life insurance to help protect their family against an early demise.”

If you are in your 40s.

Cassidy says people generally don’t get serious about saving until they get into their 40s. “I would again, contribute as much as you can to your retirement plan,” Cassidy says. “I would have automatic withdrawals come out of your paycheck if you can to contribute to Roth. Also, Cassidy says:

  • Have a budget and live within your means.
  • Consider purchasing life insurance on your parents’ lives so to help pay for college education for children and help supplement for your retirement. “It’s a great strategy no one talks about it,” he says. “I can use retirement funds to help pay for college, and when grandma passes away, use that tax-free death benefit to replace that money.”
  • Don’t underestimate what it will cost you to retire. “It’s far more than people think. You may want to stay aggressive with your investments. Do not time the market -not in your 40s.”

“In your 40s make sure your insurance is correct,” says Keating. “You need to start thinking about your wife and kids if you die early. Have to do more targeting savings. You are getting a little older: Here is retirement money, here is my fun money, here is, house money. You’re cutting down on major costs, not just revolving credit.”

If you are in your 50s

“Leading into your 50s is time to super-save,” Keating says. “The majority of people, once they hit 50, are wishing they started earlier. You have to super save. Problem is, in 50s is expenses goes up with kids. You must get loans under control. I have so many people who have put retirement savings at risk for kids. You have to look into the details. Understand what you are paying. Understand what the fees are, interest rates are, on your bank loans, auto loans. Because now, since we are in super saver mode, we can’t let any pennies fall through creases.

“Get help,” Keating says. “Get help to get a jump start. In your 50s you are moving into twilight. You must make sure everything you’ve done is going in right direction.”

This is a time when things are changing, and you have to start thinking says Cassidy.

“Now we really need to be saving as much as we possibly can because we have to remember inflation in retirement and the impact that could have on your purchasing power,” he says. “You really have to begin doing forward thinking, long term, at least 30 years. A 65-year old man today will likely live past 86 years old. A 65 year-old female will likely live past 88.

“Now we want to begin targeting your number,” he says. “What will you need to maintain the quality of life you want in retirement? What is my targeted goal? How much do I need to have saved to make it through? Consider the big picture. Think about tax implications, Social Security, the cost of health insurance and inflation.”

This is also the time you should be looking for a different kind of financial professional, Cassidy says. “You want a preservation/distribution kind of advisor as opposed to an accumulation advisor. When it comes to investments, make sure you are working with someone who is qualified and is affiliated with a registered broker/dealer or is a registered investment advisor .”

And remember that you’re not invincible and you are not 20 years old. “Your late 50s and early 60s is most likely when unexpected health issues do happen,” he says. “People think they are invincible. Things can derail your long term plans as you begin to age.”

If you are in your 60s

It’s unfortunate, but if you haven’t saved enough you have to continue to work,” says Teboda. “In your 60s, sit with an advisor. Figure out which claiming strategy can get you the greatest monthly benefit out of social security. Do a Social Security analysis to understand your options.”

The big deal is it’s not hard,” says Keating. The basics of financial planning are control your budget, spend less than you earn and keep an eye on the future just like living health — eat right, exercise and get good sleep.”


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