Current Thinking

Five Tips for Getting Smart About Retirement Right Now

Retirement planning is more important than ever before as people are living longer and having to support themselves for a longer time period after retirement. Here are five tips to help you get on the right path, at any age:

1. Start Saving For Retirement Early On

Perhaps surprisingly, most millennials plan on working during their retirement. But no matter what your plans are, take advantage of compounding by starting to save as early as you can. People who started saving for retirement in their 20s are 66% more likely to retire before age 60 than those who started in their 30s, according to a recent study from Money Rates. Evaluate and determine an intended retirement timeframe, based upon where you are right now, in order to reach your retirement savings goals.

2. Take Advantage of Employer Retirement Plans

Millennials, who became the largest generation in the American workforce in 2015, have begun to flex their workplace muscle. They have already changed the rules about how we communicate, how we work as well as how they view employee benefits—in particular, retirement benefits. 401(k) plans will become the primary source of retirement income for many millennials and businesses who offer these plans along with matching contributions will become more desirable and be able to retain talent longer. Take the time to meet with a financial advisor to determine how much you should be contributing to your 401(k) and how you should be investing those contributions in order to reach your goals.

3. Create a Realistic Budget

Analyze your current expenses – both fixed and variable. Evaluate your finances to determine your debt-to-income ratio and begin paying down that debt (highest interest rates first). Then, anticipate your future spending in order to ensure that you have enough income to cover all of your expenses. This means preparing for any future costs such as home improvements, taking a luxurious trip, picking up a new hobby, caring for children or parents, and any unforeseen medical costs. Being prepared for the unknown will help keep your retirement on track no matter what comes your way.

4. Consider Investment Risk and Asset Mix

All investments have some level of risk associated with them. While no one wants to take unnecessary risks with his or her money, keep inflation risk in mind as well. Establish an appropriate asset mix for your age, situation and time horizon to retirement. Remember not to put all your eggs in one basket. Speculating on large returns by relying on one type of investment can be a major retirement mistake that can be easily avoided by diversifying your retirement savings.

5. Plan With Your Partner

If you are married, relying only on one partner’s retirement savings to support you both can be another mistake. Plan jointly with your spouse to get the maximum advantage from both of your retirement plans. According to a recent Harris Poll of 1,800 Americans, 36% of people said their partner is saving for retirement, but approximately one in five (23%) were not aware of how much the partner is contributing to his or her retirement account/s. Of the respondents with at least one partner saving for retirement, 30% of respondents admitted that they do not communicate about how much money they will need to retire. Talk with your partner about all the available resources and plan together accordingly.

It’s important to remember that once you have your retirement plan set up, you have to be proactive about your savings — it should not just go into auto-pilot. You have to evaluate your investments at least yearly to ensure you are getting the most out your retirement plan. Increase your 401(k) savings every time you get a pay raise, rebalance your account periodically, and consider changing your investment allocation as your age and circumstances change. Check to see if you are able to receive any retirement savings perks at the end of the year. For example, at age 50, the Age 50 Catch-up Contribution allows you to contribute more to your 401(k) account. Finally, establish an appropriate asset allocation to help you determine your portfolio’s overall risk and return.

While saving requires sacrifice, focus on the rewards by visualizing the retirement that you want. Taking that first step can be the hardest, but once you have a game plan, your odds of retiring comfortably can only increase.


NOTE: Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. Past performance is not a guarantee of future results.

About the Author

Richard Rausser

Richard W. Rausser has more than 30 years of experience in the retirement benefits industry. He is Senior Vice President of Thought Leadership at Pentegra, a leading provider of retirement plan and fiduciary outsourcing to organizations nationwide. Rich is responsible for helping to shape and define Pentegra’s viewpoint on workplace retirement plans, plan design strategy, retirement success and employee savings trends. His work is used by employers, employees, advisors, policymakers and the media to produce successful outcomes for American workers.  In addition, Rich is responsible for Pentegra’s Defined Benefit line of business, which includes a team of Actuaries and other retirement plan professionals as well as Pentegra’s BOLI line of business.  He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.


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