Saving for Retirement 101

Saving for retirement is oftentimes a decades-long endeavor and as such, obviously can’t be encapsulated in a one-page blog post. But, if you’re just at the beginning of your journey and looking for some quick tips, these should certainly help you get started.

Establish an Emergency Reserve

Opening this type of account really should be your first order of business. We typically recommend keeping at least 3 – 6 months of expenses in a liquid account (i.e. checking, savings) to handle unforeseen circumstances, such as a medical emergency, disability, or job loss.

Create a Monthly Budget

Consistently utilizing a budget can help establish spending patterns, reveal inefficiencies, track progress towards goals, and uncover excess cash flow (for increased savings or additional payments on liabilities). When putting together your budget, make sure to keep it simple; that way it will be easy to implement and monitor.

Pay Down any High-Interest Debt

While it is certainly important to start saving as soon as possible, it’s equally important to begin to eliminate any high-interest debt. Think of the interest on that debt as reverse, or negative, savings. And the more of your money goes to interest, the less of it’s going toward your retirement savings.

Leverage Your Employer Match

If you have a retirement plan that has a company match, try to save the maximum amount necessary to fully leverage your employer’s contributions. Not only will more dollars be going into your plan, you’ll also benefit from the power of compounding interest on a higher balance. Otherwise, you’re essentially leaving money on the table.

Aim for Tax-Efficiency

You may have heard of 401(k)s and 403(b)s, IRA and brokerage accounts, Traditional vs. Roth – the financial industry has a myriad of different savings vehicles and each one serves a different tax purpose. The scope of this post is much too short to get into the finer points of which one(s) you should choose, but at the very least, now is a great time to begin education yourself about the differences.

Manage Your Risk

This is a broad statement but really encompasses many different things: life insurance, disability insurance, health insurance, home & auto insurance, estate planning (i.e. Wills, Powers of Attorney), and even investment and tax diversification. Even if you do a great job saving for retirement – one health issue, one accident – can leave your entire retirement picture in shambles. This isn’t meant to scare you, instead it’s meant to make you aware and hopefully encourage you to take action to protect yourself. Insurance and estate planning isn’t cheap, but not incorporating them into your plans can wind up being far more expense. Remember: an ounce of prevention is worth a pound of cure.

As I mentioned above, saving for retirement takes years and is certainly more complex than just following a few bulleted points. If you’d like to sit down with a CFP® professional and establish your own personalized financial plan, we would welcome you contact us here to set up a complimentary complication. Hopefully we’ll see you soon!