How to Prepare for Retirement
Will you be retiring soon? You can avoid future financial worries by reviewing credit activity and making adjustments to budgets and investments now instead ofwaiting until you actually retire. Retirement can be worry-free if you plan in advance. Retirement is a time to be worry-free and enjoy time with loved ones, participate in your favorite activities and hobbies and explore new interests.
Retirement is the last of the major financial life stages and nearing retirement means you will be living on a fixed income, and many people find that very difficult to adjust to. By slowly introducing changes in your spending and investments, and reviewing your personal credit, you will be able to ease into the financial adjustments that are required for retirement.
- Start saving and keep saving
Saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you need to and try to increase by a small amount every month. The sooner you start saving, the more time your money has to grow. So make saving for retirement a priority. Devise a plan and stick to it.
- Know what your retirement needs are
Its no secret that retirement is expensive. The experts estimate you will need approximately 70% of your pre-retirement income to maintain your standard of living when you stop working. So it’s important to take charge of your financial future. So, the key to a secure retirement is to plan ahead.
If you are a state employee a portion of your monthly pay is deducted each month and put into CalPERS Retirement Fund. The amount of your contribution and the interest earned reflects on your annual statement. As you begin to plan for retirement you want to request an estimate of your retirement allowance.
- Put money into an IRA
You can put $5,000 a year into an Individual Retirement Account (IRA) and delay paying taxes on your earnings until retirement age. You can also start with much less. When you open an IRA you have several options – a traditional IRA or a Roth IRA. Your taxes on that money will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs are a simple way to save and they can be set up so that an amount is automatically deducted from your checking or savings account and deposited directly into the IRA.
- Contribute to your employer’s retirement savings plan
Establish a retirement savings program like a 401k through your employer. If your employer offers a matching retirement savings plan, make it a priority to contribute and try and contribute the maximum match amount so that you don’t lose any of that "free" money. If your employer doesn’t offer a retirement plan, suggest they start one.
- Learn about your employer’s pension plan
If your current employer has a traditional pension plan, check to see if you are covered by the plan and thoroughly understand how it works. It is important to request individual benefit statements to see how much your pension will be worth when you retire.
- Research your social security benefits
Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You can estimate your benefit by using the retirement estimator on the Social Security Administration website or call them at 800-772-1213 for additional information.
- Consider basic investments
In addition to contributing to your retirement savings account, it may be prudent to consider varying your investment portfolio. How you save can be just as important as how much you save.
- Don’t touch your retirement savings
Life will always give you reasons to dip into your retirement savings. If you do, you’ll lose principal and interest and you will likely have tax consequences. If you change jobs, just roll over your savings directly into an IRA or your new employer’s retirement plan. Make sure you don’t confuse your retirement savings with an emergency or rainy- day fund.
- Ask questions
Remember, you are responsible for your retirement financial security because long gone are the days that every employer will provide its employees with pension plans that would underwrite your retirement. Depending on your needs and goals, an allU.S. Credit Union IRA may be the right retirement investment option for you. If you need to create an account to save money to open an IRA or other investment account, many members use our Base Share Account. You can also invest in a high-yielding IRA certificate. To see how much you’ll need to save for your golden years, go to our Retirement Income Calculator
Healthcare, consider the options and plans available before you retire. Normally your access to a health care provider is a key financial consideration in retirement planning.
Planning for retirement should begin with your very first job and along the way make sure you adjust your plans as your life and circumstances change. But no matter when you start, the key is to get started and allU.S. Credit Union can help make your retirement years as comfortable as possible.