Retirement Planning – What to consider and how much is “enough”?
The task of saving for retirement is daunting, but it is manageable if you have a plan and stick with it according to Ed Maher, CFP® with The Investment Center at Citizens National Bank. “Retirement is expensive and that’s why the key is to start saving early,” states Maher. He often sees young people get discouraged as they’re just beginning to consider retirement planning due to the volatility of the current market. “I say to those folks in their 20’s, 30’s and 40’s, continue to save and invest.” According to Maher, markets move in cycles and the market will eventually return. He encourages them to stay with the market.
For those who have employer-sponsored retirement plans, such as 401k’s, this is a great way to maximize retirement dollars. “If the employer offers a percentage match, make sure you’re investing the maximum,” encourages Maher. If your company does not offer such a plan, consider Individual Retirement Accounts (IRAs). An individual can place up to $5000 per year, or $6000 age 50 and over, into one of these accounts. “Once you have money in a 401k or IRA, do not touch it!” warns Maher. There are ways to access those funds, but they come with a huge penalty and you can never really get those funds back.
For those nearing the age of retirement, there are several things to consider. “A big issue right now is healthcare,” explains Maher. “Many people assume they will retire at age 62, but Medicare does not kick in until age 65 and healthcare costs may be too much to afford for that 3 year time period so they extend their retirement age.” Another consideration is social security benefits. Maher says “Think about your social security benefits. You can retire now at age 62, but the longer you work, the more you will accumulate in social security and the greater the benefits will be when you draw at an older age.” Additionally, the closer a person gets to retirement the better handle they should have on their debt. “If you have credit cards, pay them down or eliminate them completely. Likewise, payoff your mortgage if you’re able so you have as little monthly debt to worry about as possible.”
So how much is “enough” to save for retirement? According to Maher it’s best to sit down with a financial planner and discuss your retirement income needs. Consider if you have a pension,
how much social security benefits will be and how many years you expect to be retired. Then consider your expected expenses per month and find the difference. This is the amount you’ll need to use of your retirement savings. “The Certified Financial Planning Group currently recommends a 4% withdrawal rate per year from your retirement savings in order to maintain your current balances,” states Maher. So if you have $100,000 saved, you can safely take only $4000 per year from that account to supplement your retirement. “Hopefully the market will return to normal cycles soon and we’ll start to see higher returns again – If that happens this guideline will change. With 10% returns an investor can double their money in seven years.”
For more information about The Investment Center, visit www.ohioinvests.com or call any of our CNB offices to schedule an appointment with an investment representative.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. -Securities offered through LPL Financial, member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.
Citizens National Bank and The Investment Center are not registered broker/dealers and are not affiliated with LPL Financial.