Having just had a birthday in my mid (all right, moving to upper) 50’s, I fleetingly thought about what retirement planning for me would be like. In my 25+ years of helping people move into their new paradigm of life, I rarely thought about it myself. Now, not to worry. I have no intention of retiring…at least not in the near future- I’m having too much fun doing what I do every day.
Retirement planning takes time. Not the time it takes to do the planning, but to do the preparation. As we move down the road of life, many of us begin to reflect on what we have learned, and what we can impart to the next generation(s) to help them along and perhaps not trip in the potholes of life. If you have this conversation with your children, in the early years they are likely to roll their eyes and think you are being overly protective and, after all, what do you know? But as we get older, as do they, all of a sudden we seem to be getting smarter. There’s an old story that says “when my child was in his (or her) teens, I knew nothing. Music, culture, clothing…I knew nothing. When they got out of college at age 21, I was a fountain of advice. It’s amazing how much I learned in those 6 or so years…”
In all the advice I give daily, there are two huge items of sage. The first is to save, save save. It’s so easy as we go through life to come up with excuses not to save- things to buy, places to go, people to impress. The biggest item to share is to get involved in a pension plan as soon as you can, and contribute at least 75% of the maximum allowable contribution to the plan. Thinking as if you were 21, here are some contribution suggestions:
- If you work for a large company, utilize the 401(k), limited to $16,500 per year.
- Non-profit- take part in your 403(b) tax sheltered annuity plan, limited to $16,500 per year
Have your own business?
- Start a Simple IRA- contribute up to $11,500* or 100% of compensation
- Start a SEP IRA- here you can contribute up to $49,000* a year
- Traditional IRA (tax deductible)- $5000* subject to limitations
- Roth IRA (non tax-deductible) – $5000* per year
In addition to the above, there are Profit Sharing plans, Money Purchase plans, Defined Contribution and Defined Benefit plans…you get the idea. The Government has set up many ways for us to prepare for the future, and all it takes is the vision to see that saving now is what will make the retirement part of your lifetime the time of your life. The value of compounding has been called the 8th wonder of the world, and if you’re young and smart, it’s yours for the taking. Tell your children…tell your grandchildren…shout it from the rooftops- save, save save!
Oh…the second piece of sage advice? Eat all the junk food you can, because by the time you reach 30…
*Contribution limits subject to many factors such as age, tax bracket, marital status, job position and others. Some employee contributions may be matched by your employer subject to vesting limits, which may increase your savings amounts. Check with your planner and tax advisor to determine the plan most appropriate for you. Contributions limits may change from year to year- check with your professionals periodically as to how your limits may adjust.
