Financial milestones: retirement planning

Published on May 19, 2015 | LPL Financial

Retirement planning is a journey. And the sooner you start, the easier it is. But whether you’re in your 20s or 50s, have a lot of expenses, or don’t make much money, there are ways to build up and work toward protecting your retirement nest egg that aren’t as difficult as you may think.

In your 20s

Start saving now

At your age, retirement planning is probably the last thing on your mind. And saving is hard to do when you’re just starting out. However, with so many saving years ahead of you, you’re in the best position to have plenty of money to retire well.

Sign up for your company’s 401(K)

A 401(k) lets you automatically deposit a percentage of your paycheck into a retirement savings account that earns interest. Most companies will match what you contribute to your 401(k) up to a certain amount, so savings add up faster. Deposits are made with pre-tax dollars, which lowers your taxable income.

No 401(K)? Go with a Roth IRA

Like a 401(k), you can set up automatic deposits to a Roth IRA from your paycheck. However, the money you deposit is already taxed, which means you won’t have to pay taxes on withdrawals.

In your 30s

Make bold investment choices

In your 30’s you should still be investing aggressively. Just don’t put all of your eggs in one basket. Be sure to vary your investments and don’t be afraid of taking a few risks. You’ll benefit from higher returns and you’re still young enough to recoup any losses.

Start your kid’s college fund now

It’s never too early to save for college Ð just be sure not to forfeit your retirement savings. There are no student loans or grants to pay for retirement. So if you want to pay for your children’s college, the earlier you start the better. See if your state sponsors a 529 plan for education expenses. It has a lot of tax advantages.

In your 40s

Save the maximum

If you’ve been neglecting your retirement savings, you’re going to have to work hard to catch up. And you may have to cut back on spending to do so. If nothing else, make sure you’re putting the maximum amount possible into your 401(k). Calculating how much you should be saving each year to reach your retirement goals can be the wake-up call you need delete and move period after need.

Diversify

In your 40s, you’re still long enough away from retirement, so you don’t have to play it too safe with your investments. However, balance is always a good thing. And you should keep an eye on your asset allocation and diversification. Consider scaling back your stock investments to 80 percent of your portfolio, and put the rest in bonds or other conservative holdings.

In your 50s

Get professional advice

At this stage of the game, it’s important to set goals for your retirement. A financial advisor can give you a fresh perspective on your investments and planning. And provide the guidance you need to reach your goals.

Keep saving

Now’s not the time to slow down on saving. Put as much money as you can into your 401(k)s, IRAs, and other tax-sheltered retirement accounts. And take advantage of any “catch-up” contribution opportunities. If you’re short of your goals, you may have to take on some risk with stock investments in order to increase your returns.

Be prepared for medical expenses

Unexpected medical bills and long-term care can wipe out your retirement savings in no time. You may want to consider long-term health insurance which pays for things like assisted living and nursing homes. It’s very expensive, however, and payments may be too tough to handle in retirement. A less expensive option is to add supplemental insurance to Medicare, such as prescription drug coverage.

Find your own way

It’s never too early or too late to take steps toward saving for retirement. The important thing is to get started and stick with it. And remember that your retirement journey will be unique. Try not to compare yourself to others. Every one has different needs, circumstances and risk tolerance. What works for some people may not work for you. Above all, don’t be afraid to ask for help if you need it. A great place to start is a complimentary retirement review with a financial consultant at Webster Investments. It could make a big difference in your retirement strategy and success.

We hope this blog has answered a lot of your questions about retirement. You can download the complete guide for future reference.