“People don’t plan to fail they fail to plan. Retirement is about what you want out of life, what do you need to do to sustain the lifestyle you have become accustomed too? Unfortunately, most people in America never really retire because they have not planned properly. Retirement is a process that begins in your 20s, 30s, 40s.” – Garry Rutledge, Saxon Partner.

CIO

The biggest hurdle of retirement is getting something started. Getting a start on retirement early in life will provide a massive amount of appreciation over time. Even if only a small amount is put away early in life, compound interest will do much of the work. Here are some other ways to begin building your retirement funds.

20s

In your 20s, time is your biggest ally when it comes to saving for retirement. Many people in their twenties are just getting out of school and excited to live life rather than thinking about putting something away for retirement that seems so far down the road.

Investigate any company options

Consider employer sponsored plans available- 401k, 457, 403(b) – different sectors of the economy have different company sponsored retirement plans.

Know where you are headed.

  • Only 48% of people have even bothered trying to figure out how much they need to retire comfortably, according to the Employee Benefit Research Institute’s 2015 Retirement Confidence Survey.
  • The rule of 72 is a math rule that determines how long it will take to double funds for any given rate of return. The amount returned divided by 72 would be the amount of time it takes to double your money. Ex. If your money is in a savings account earning three percent a year, it will take twenty-four years to double your money (72/3=24).

Save outside of work

  • A Roth is a type of retirement account that grows tax free meaning you only pay taxes on the money going into the account.
  • “I would heavily encourage a Roth, I am very pro Roth IRA versus the traditional tax deferred plan,” Garry advised. “The best analogy I can make to this is: ‘would you rather pay taxes on the crop you harvest or would you rather pay taxes on the seeds you plant?’ What this really means is that you can take a small handful of seeds and plant a crop that will amount to a huge harvest.”

30s

It is about late 30s when people begin to realize retirement is not that far away. This is the time in life that people are thinking about beginning families and having kids, it is also the point in life that you can start understanding what realistic retirement goals look like. “In my 28 years of experience,” Garry explained, “most people don’t start planning for retirement until their late 30s.” Whether you’re already saving or just starting now, carrying good habits throughout your 30s can pay off in the future.

Company sponsored plans are key

  • If you are just beginning in 30s, consider company sponsored plans that will have a match of a percentage of one’s salary. That translates into a 100% return on your money and you haven’t done any investing yet.
  • If you are already contributing into your company’s plan, make small increases each year to work towards your savings goal.

Keep it balanced

  • “The ‘perfect retirement plan’ would have the perfect balance of pretax contributions, meaning before tax qualified plans and after tax contributions (brokerage accounts or Roth IRAs) allow both plans to complement each other.”

College is important, but retirement comes first

  • A lot of people try to begin planning for their children’s college at this point but retirement planning should come before planning for college. After all, people won’t lend you money to retire with.

40s/50s/60s

The biggest thing at this point in life is “Do you know what your plan is and are you on track?” If you build a house, you start with a plan. Same is true for retirement.

This is the time to be deciding if you are on track for retirement. Do you have a plan and a budget? Have you created a financial plan? Do you know how you want to retire? Your perspective of what retirement looks like is truly your reality.

The closer you get to 65, the retirement age, more alarms that are beginning to go off. If you haven’t done anything at this point you must take a serious look at what your plans are

Slow and Steady

  • If you’ve been planning and following a plan, keep up the good work! The only way to eat an elephant is one bite at a time.

If you have not begun planning…

  • Time isn’t your ally at this point.
  • You will have to be more aggressive in your strategies.
  • Again, the most beneficial thing you can do is seek out company plans with matches.

Know your alternatives

• A thing to consider that most people don’t plan for is long term care. This is a good option to explore because it is still cheap enough in your 50s to afford.

• Consider how social security will play into your financial plan. Make sure you maximize your social security benefit.

• Have you changed your investment risk to meet your risk tolerance? As you get older your investments cannot generally tolerate the same amount of risk. The sequence of returns in retirement can devastate your retirement plan.

Seek professional help and guidance

  • Saxon takes a holistic approach to planning.
    • Company sponsored plan approach
      • While Saxon does not benefit from any contributions to your company plan, they know that this is the best place for a client’s money to be.
    • Saxon can help you stay on track and give sound investment advice

“The advisors at Saxon can help you create a plan for the future and offer suggestions on how to invest money,” explained Garry. “Asking for help is one of the best things you can do – people are busy – and developing a plan and having a ‘coach’ to make sure you stick to the plan when things seem bleak will reward you over time”.

 

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