Perhaps more than any other advice on retirement you’ll find, starting young is the first suggestion. Being proactive with your retirement planning, and saving and investing early will often yield more returns for less. But even if you’re starting to save for retirement later in life, that doesn’t mean your retirement goals are out of reach.
There are several strategies you can implement to still reach your retirement goals at or past 40. To help you get ahead, OWLFI’s retirement planning experts in Kansas have put together this guide.
Determine How Much Savings You Need
Before you begin taking action, it’s wise to identify the amount of savings you’d like to have at retirement. Depending on your current income and lifestyle, the total savings you’ll want to have will likely vary. In addition, you should also factor in your bigger life goals like travel so you can estimate what a comfortable, fulfilling retirement looks like to you.
A commonly used rule of thumb is the 4% rule. This means that your retirement spending should be around 3-4% of your total savings and investments during the first year, with adjustments made each year for inflation. However, no one’s situation or goals are ever exactly the same. In addition, it’s often recommended that you save 10% to 15% of your take-home income, but you may need to save more at or past 40 to reach your retirement fund goals.
401(k)s and IRAs
Either way, once you have a goal established, a good priority would be to max out your 401(k). Until you hit 50, the annual limit you can contribute is $19,000. After 50, you can contribute an additional $6,000 each year. The same rule applies to IRAs, meaning you can contribute $6,000 every year until you’re 50 or older. At that point, you can contribute up to $7,000.
A key benefit of investing in your 401(k) and IRA is that these funds will compound and grow without taxes being taken out. What’s more, qualified withdrawals are tax-free as well.
After you’ve established your savings, and begun to max out your IRA and 401(k), it’s time to begin investing. While it may be tempting to purchase higher risk, higher return investments, a wiser move is to minimize your risk.
At OWLFI, we offer investment management services for stocks, bonds, and cash that prioritize maximizing returns while minimizing any dangers to your accounts. To ensure you’re setting yourself up for financial success in retirement, we can help you determine investments that are right for your specific situation.
If you have outstanding credit card debt, car loans, or additional high-interest debts, paying these off should be a key priority. The more debt you have, the less you’re able to invest into your retirement. You may also want to consider making additional payments on your mortgage to begin paying down the principal. Furthermore, at this stage, spending less now will help you save for the future. While it may not seem significant, even small changes to spending habits or routines can add up over time.
Start Your Retirement Planning Journey with Professional Advisors in Kansas
OWLFI was established to bridge the gap between our clients’ Financial advisors, CPAs, and Estate Planning Attorneys. With a number of financial and retirement planning services, we strive to make your goals clear and achievable. No matter where you are in your journey, we can help you create a plan that accommodates your unique needs and situation.
Ready to start the process? Reach out to us today at 913-441-8380 to schedule a consultation.