What is Retirement Planning?
The process of retirement planning involves saving and investing portions of your current paycheck so you have money to live on when you decide to leave the workforce. Simply put, you are putting away money now to pay yourself in the future. We think your retirement timeline is made easier by breaking down the process into five key decisions.
1. Deciding when to start planning. Financial planning, at its core, demands a plan. We recommend you start this as soon as possible. How much money you need to save and how much money it will cost in the long run is dependent on when you start.
2. Deciding how much money you will need. Retirement planning depends on one number that will provide you with a comfortable living while no longer working. A financial advisor can help you determine this number using life expectancy actuary tables, statistical data, and historical economic data.
3. Deciding to prioritize savings. No matter where you are in life, there is a good chance you have other financial obligations that make it harder for you to choose to save. But part of this step is making that difficult leap. At this point, your debt-to-income ratio will come into play, followed by a serious decision to make retirement investing a priority. Sometimes thinking of it as a bill helps incorporate it into your budget. A financial advisor can sometimes even find ways to save you hadn’t considered before.
4. Deciding on a retirement account. This decision involves picking a retirement account based on your current situation and eventual goals. Common accounts include:401(k)
- Roth IRA
- Traditional IRA
- Self-directed IRA
- Simple IRA
- SEP IRA
- Solo 401(k)
5. Deciding on specific investments. Once you choose a retirement account, you need to determine what you will invest in. Some of the most common choices include stocks, bonds, and mutual funds. Here is another area where enlisting the help of an experienced financial advisor can help simplify this process. Financial advisors have their thumb on the pulse of the investment industry and can help you decide how much risk you are comfortable with, along with other qualifying decisions.
Important Milestones in Your Retirement Timeline
Regardless of when you decide to begin retirement planning, there are important milestones you should plan on:
Age 59 ½: This is the earliest you can start withdrawing from a 401(k) or IRA without a 10% penalty
Age 62: You are eligible for Social Security at this age, but with reduced benefits.
Age 64 ¾: This is the time to enroll in Medicare
Age 65: Medicare officially begins; time to sign up for Medigap
Age 66-67: You qualify for full Social Security retirement benefit; if you wait until you are 70, its value will increase each month you delay
Depending on your year of birth, AND if you were born from 1943 to 1960, your full retirement age differs. Source: Social Security Administration.
Age 70: If you haven’t filed yet, it’s time to file for Social Security
Age 72: Now is when you need to begin taking required minimum distributions (RMDs) from your retirement plans
Retirement Planning with a Professional
If you have not yet begun planning for your financial future, there is no time like the present. Our Quantum Strategies Wealth Advisory team can walk you through all the decisions you need to help grow or preserve your wealth. Contact us today, and let’s get started on your future!
Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.