Financial Questions That Count (Part 2: Beyond the Basics: Retirement Planning)Submitted by Miller Financial Group | Red Oak Iowa Financial Advisor on October 25th, 2017
What if something happened to me while my kids are still in school? Would they still be able to go to college? Would my spouse be able to stay in our current home? Would they have to downsize? What if one of the breadwinners in our house became disabled? Would we be able to maintain our current lifestyle and care for them? Do we have reserves in place in case the refrigerator has to be replaced tomorrow?
These are the types of questions that we addressed last month. Do we have the basics covered? Are we prepared in case of an emergency and for what life throws at us in our everyday lives? If you don’t feel prepared, I encourage you to work on this first before giving a lot of consideration to where I am going with this today. It is so hard to make progress and to move your financial life forward if the resources are not available to help you address life’s financial emergencies as they come up. Adequate protection, an emergency fund, and a good understanding of where you are today are vital when trying to move your financial life forward.
So what is next? Let’s say we are adequately protected and have some backup resources in place, what’s next? Retirement planning. If you are just starting out, or have several years in the workforce, this needs to be a key consideration. If you are young and just starting out retirement may seem like such an abstract thought, one that you can wait and worry about later. It is true, you do have a long time to plan for this, but that “time” is also your greatest ally when it comes to preparing for retirement.
If you are in your 20s or 30s, the fact that you may have 30 to 40 years to save, is the biggest advantages you may ever have when it comes to your financial future. The “time-value-of-money” and the magic of compounding interest is now your best friend. Even small amounts set aside now for may make a significant difference between just retiring someday, and retiring very well!
So what if you are on the other end of the spectrum and retirement may be only 5 to 10 years away? I’m here to tell you that it is never too late to start saving, and to make a difference! Fortunately, our nation’s retirement savings policies are designed to help those that may be getting a late start, or need to “catch-up” when it comes to their retirement savings. IRAs, 401ks, 403b plans, and many other retirement vehicles contain “catch-up” provisions designed to help savers over the age of 50 to make a late push toward their retirement savings. So, if you find yourself behind the eight-ball and don’t feel that you may have saved enough up to this time, there may still be an opportunity for you to make a difference in your retirement picture.
It is also very important for retirement savers of all ages to fully understand their employer’s retirement savings benefits if they are available. For example, does your employer provide matching funds for your retirement plan? If so, are you at least taking fully advantage of this “free money” that they will contribute on your behalf? Also, have you ever sat down with someone to calculate just how much you should be setting aside, and then comparing that to what your budget will stand? Also, could you adjust your spending habits in the short term to allow for more savings to use in the future? Tightening your belt just a little now while still working, may allow you to set aside for a better retirement later.
The next question to ask when it comes to retirement planning and saving is; Am I saving in a tax advantageous manner? Am I utilizing these tax qualified savings tools correctly and to my best advantage? How will this affect my distribution and the use of these funds later when I need them? How will these distributions potentially affect the taxability of any pension benefits I may receive or my Social Security?
Next month we will look at the importance of retirement distribution planning and the importance of coordinating your withdrawal strategy with your Social Security, a pension, or other income you may receive. Until then, I wish you “Better Financial Living!”
Daniel S. Miller, CERTIFIED FINANCIAL PLANNER TM
Miller Financial Group, Inc.
Daniel S. Miller is an investment adviser representative of, and securities and advisory services are offered through, USA Financial Securities Corp. (Member FINRA/SIPC). USA Financial Securities is a registered investment adviser located at 6020 E Fulton St., Ada, MI 49301. Miller Financial Group is not affiliated with USA Financial Securities.