Retirement Planning

Retirement Planning For Each Stage of Life

The financial decisions you make today will directly impact your long term financial future. That’s why it’s important to have specific financial goals for each stage of your life. You will feel more confident heading into retirement if you know you made the right financial decisions at each stage.

Ages 18-29: Eliminate credit card debt

During this stage, your first priority should be getting out of debt. According to a recent Federal Reserve study, the average family has more than seven credit cards with a total credit card debt of more than $8,000.

Since credit card interest rates average about 15 percent, it’s difficult to earn that same percentage on your investments each year. Getting a handle on your credit card debt should give you more resources to invest in your retirement.

Ages 30-44: Sign up for an automatic investment plan

The most important action during this stage is to take advantage of a disciplined savings program for long-term growth such as your employer’s 401(k) or 403(b) retirement savings plan. These types of retirement plans are a great way to save because the money is pulled straight from your paycheck before you can spend it and is invested directly in a mutual fund or other investment you choose.

Ages 45-54: Review your progress and make adjustments

Now is the time to evaluate your savings program to make sure you are on track to meet your long term financial goals. Here are a few questions to consider:

• Do I have a well balanced, diversified portfolio?
• Am I taking full advantage of any company-matched contributions?
• Am I taking advantage of the many tax breaks from employer sponsored plans?

If you answered no to any of these or similar questions, then it’s important to make adjustments with your plan.

Ages 55-65: Match your income sources with income needs

Since retirement is getting closer, you should have a pretty good estimate of your income from Social Security and any defined benefit pension you’re entitled to at work. During this stage, you should look at all of your sources of income to see if they match up with your income needs. Here are a few questions to consider:

• Will your mortgage be paid off?
• Will consumer debt or college loans taken on behalf of a child be paid off?
• Do you want (or need) to work in retirement?
• Where will you live?

By answering these questions, you can better understand your financial picture as you prepare for retirement.

Ages 66 and over: Develop a plan to spend investment assets

New retirees should focus on developing a plan for spending their investment assets. When determining the amount of money to withdraw from your retirement plan each year, consider your goals. For example, do you want to leave an inheritance or conserve assets for later in retirement?

Choose a practical amount of income to withdraw each year from your retirement accounts and be prepared to change that amount as your investment returns fluctuate. For example, if you experience good investment results early in retirement, you may decide to spend more. But if the market declines, you may need to take less from your portfolio to conserve assets for later.

Regardless of what stage of life you are in, your Portland financial advisor can tailor a retirement plan to meet your specific needs.