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Retirement Tips from a Financial Planner

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  • Retirement Tips from a Financial Planner

by | Sep 14, 2022

When people think about retirement, they usually have a specific goal or image in mind of what they want their life to look like. But retirement planning is more than just setting up your retirement contributions and watching the clock tick down until you reach retirement age. There’s a strategy to planning for retirement, especially if you started late, want to retire early, or if you want a combination of the two. These tips from a financial planner will help you set yourself up for retirement success.

Retirement Planning Guide

When it comes to retirement, no one knows their way around better than financial advisors and financial planners. Retirement planning can be complicated and if you try to go it alone then there’s a chance you’ll be successful. However, there’s also a chance that you won’t have the retirement funds you could have had with the advice of a certified financial planner.

Let’s take a look at these retirement planning tips and see how you can improve your own retirement strategy.

1. Max Out Retirement Contributions

No matter if you’re on track or if you’re just getting started, one great way to build up your retirement accounts is to max out your 401(k) contributions. Currently, the IRS upped the maximum contribution level to $19,500 for a 401(k). If you have an IRA (Individual Retirement Account) instead, the annual maximum is $6,000. Getting money into your retirement accounts now allows you to take advantage of the growing funds at a later date.

2. Get Your Employer Match

Even if you’re not in a position to completely max out your retirement contributions, you at least want to make sure you’re maxing out your employer match. If you don’t, you’re missing out on free money.

“If your employer offers a retirement contribution match then take advantage of it. Don’t’ leave that money on the table. If they will match contributions up to 5% of your salary, then make sure you’re contributing at least that amount. If they’re offering 50% of the first 8% of your salary, then contribute 8%. If you aren’t signed up for the matching program with your employer, get signed up. Don’t pass up free money. It could end up making a huge difference in your retirement.”  Chuck Elhoff

3. Get Financial Advice from a Professional

Financial planning is complicated. If you’re worried about making the right move, don’t be. In a Charles Schwab survey in 2014, 70% of 401(k) participants stated that they’d feel confident in making decisions with professional help. Getting retirement planning advice isn’t a bad idea. Remember that professional, certified financial planners help people make financial decisions for a living. They know the ins and outs of the retirement planning world and can help you understand if you’re on track to manage your goals.

Companies such as Virtus Wealth Management offer a variety of services for every aspect of life. This is especially true with today’s economic conditions. Often, a customized approach is needed to help ensure you hit your financial goals.

4. Pay Off Debt

Sometimes paying interest is unavoidable. However, it can often be controllable. Speak to a personal wealth planner about the best way to approach your debts. Some people prefer the snowball method of paying off smaller debts first while others prefer to pay down larger high-interest debts. Each option has pros and cons, and a financial planner can help determine which works best for your situation. In some cases, you may even be better off with a debt consolidation plan. It’s important to find what works for you and your situation.

“Debt is dangerous. Sometimes it’s a necessity but other times you may find yourself paying thousands of dollars in interest merely for the convenience of having something you want right now rather than planning and waiting. For example, if spend $15,000 on furniture for a new home with an APR of 19.99%, it will take you five years and close to $9,000 in interest in addition to the principal. That’s 57 percent over what you would have paid if you made the purchases with cash. Sometimes, we need to evaluate if having what we want right now is the best move for our financial future or if we can stand to wait a year or two while we save.”  Chuck Elhoff

Another benefit to paying off debt sooner than later is the fact that when you’re retired and living on your set fixed income, you don’t have to worry about those funds going toward your debt. It’s best to have most if not all debts paid off by the time you receive your final salary check. Not only does this save you on fees and whatever interest rate you have for that debt, but it provides you with more options on how to live and enjoy life on your fixed retirement income and retirement savings.

5. Understand Your Retirement Number

It was generally understood that $1 million was enough to retire comfortably. However, it’s estimated that in the year 2045 you’ll need nearly $2.5 million just to have the same purchasing power that you’d have today with $1 million in retirement funds. That number is based on a 3% annual inflation rate. However, recent events have shown exponential increases in inflation with jumps as high as 8.5%. It’s quickly becoming clearer that $1 million may not be enough to retire in the future.

Working with a retirement planner can help you determine what your retirement number is for a comfortable retirement. They can also help you create a plan geared toward reaching that number as effectively as possible.

6. Increase Cash Reserves

In addition to investing in retirement accounts, it’s a good idea to build a cash reserve. This is money you keep on hand to meet emergency or short-term needs. This money makes it possible for you to handle situations without incurring debt from a credit card or a personal loan.

“We generally recommend having enough cash reserves to cover six months of expenses. If your expenses are $6,000 per month, you want to have a minimum of $36,000 that is easily accessible without penalties. This provides a way to stay on top of monthly bills if there’s a sudden health emergency or unpredicted change in employment.”  Brian Tillotson

Having this money also prevents you from being forced to sell investments at a loss prior to your retirement. It allows you to ride the ups and downs of the stock market and life without sacrificing your future.

7. Get the Right Insurance Coverage

Some people plan on using insurance payments to contribute to retirement assets. Term life insurance is less expensive which means you’re left with more money to invest. However, once the coverage period ends, you get nothing back. On the other hand, whole life insurance accumulates a cash value that you’re able to borrow against or withdraw.

Many financial planners are well versed in insurance and can offer advice on which types of plans are best for your situation. In addition to helping with life insurance, they may have tools or products related to car insurance, health insurance, renters insurance, and even what insurance company may offer the best multi-policy discount with the insurance products best aligned with your needs.

8. Pay Attention to Asset Allocation

When deciding between bonds, aggressive stock picks, or target-date funds it’s best to go with a blend.

“The smartest thing you can do is to diversify across multiple asset classes and within asset classes. While none of these will ensure protection or a profit in a declining market, diversifying does make the ride much smoother. If you focus on any one asset over the other, then you may be in for a bumpy ride.”  Brian Tillotson

9. Understand Your Social Security Benefits

You can find a calculator to help estimate your retirement benefits on the federal government’s Social Security website. You’re required to provide some personal information to use the calculator. In addition, they have quite a bit of information regarding your social security benefit.

10. Use Social Security to Prolong 401k Plan Contributions

The government allows you to start collecting benefits between the age of 66 and 67 depending on when you were born. However, if you’ve not yet retired from your job, you can use those benefits to help cover your living expenses and free up additional income to increase your 401(k) contributions.

11. Don’t Drain Your Retirement Accounts

Throughout the ups and downs of life, you may find yourself in a situation where your retirement funds seem like the answer. And, unless it’s an absolute emergency, it’s best to leave them alone. The IRS put stiff penalties in place if you take that money prior to your retirement. You may have to pay an additional 10% in taxes on any early distributions. Not to mention the fact that you’re taking that money away from your future self. Before any premature withdrawal ask yourself if there’s another way.

12. Talk to Other Retirees

While talking to other retirees isn’t a substitute for professional retirement advice, they can provide helpful information. You may learn something from those who’ve been able to turn modest means into a large nest egg. They may have tips you can implement into your own life.

Likewise, you can also learn from the mistakes of others. They may have a suggestion on something they would have done differently or something that didn’t work out for them the way that they thought it would.

13. Turn Spending into Investing

It’s easy to put off your retirement plan for something you want right now. Many people struggle with this. Retirement can seem far away, and it can feel as though you have a lot of time to prepare. However, this isn’t always the case.

“Far too often we see people focused on what they want now versus what they want in the future. We understand this mindset, we really do. Everyone wants to reward themselves from time to time and live a life worth living. However, what they don’t often realize is that the decisions we make now can have a major impact on their overall retirement plan. While that new flatscreen might seem like a great idea or the cable TV package may feel too good to pass up, ask yourself if you really need those things right now. Think about what that extra $1000 or $1500 is costing you in the long run. With compound interest, that money could grow into something far more valuable. We aren’t saying you can’t enjoy your life now. However, you should focus on how you can enjoy life responsibly while still keeping your future in mind.”  Karen Spence

14. Start Early

This tip can be frustrating for individuals who didn’t start their retirement planning early on in their 20s. For some people, retirement doesn’t feel like a luxury you can spend time dreaming about, not when you’re doing everything you can simply to survive. But the truth is, that even a small contribution early on can make an incredible difference.

For example, a 25-year-old who is able to contribute $4,000 a year for just 10 years will accrue more by the time they are 60 than someone who contributes $4000 yearly between the ages of 35 and 60. The lesson here is to not put off retirement contributions for when you have more money down the road. Get into the habit of at least contributing something (enough to get the employer match preferably) so you’ll have a better chance of hitting your retirement goals.

15. Don’t Think it’s Too Late

Just because you didn’t get started early doesn’t mean that there’s nothing you can do when it comes to retirement planning. Even if you’re 55 years old you can still achieve retirement security with some work.

If you are getting a late start on your retirement savings, it’s a good idea to speak with a financial adviser. They can help evaluate your situation to provide you with the information you need to choose the best course of action for your situation. They can also provide you with ideas on how you can free up some money now for investment such as:

  • Mortgage refinance
  • Money market accounts
  • Reviewing your retirement investing strategy
  • Debt consolidation
  • 401(k) rollover services

A personal finance advisor can consider your checking account, savings accounts, and your overall financial plan and net worth to find a path toward your financial goals.

“It’s not uncommon for people to misunderstand their own financial situation. We’ve helped those see how contributing more toward retirement can actually lower their tax bracket and open up additional money to cover investments and living expenses. They may not realize that CD rates or bond yields are holding them back. There are several ways to approach retirement and, depending on your risk tolerance, we can find a path for you. Retirement planning is a balancing act between you and your future self, and we’re happy to play a part in that conversation so you can live a great life both now, and in the future.”  Karen Spence

Contact Us

When you need an experienced financial advisor, the team at Virtus Wealth Management is here to serve you. Our team has years of financial wisdom in many different areas. Our areas of concentration include retirement planning, wealth management, risk management, and more. If you’re wanting to evaluate your plan to save for retirement, get into or change your approach to the stock market, or if you just need overall investment advice, we’re here to answer your questions.

Call us today at 866-407-4320 to learn more about how our services and how we can help you find a great financial advisor.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Good Life Advisors, a registered investment advisor. Good Life Advisors and Virtus Wealth Management are separate entities from LPL Financial.

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.

Diversification does not protect against market risk.

All investing includes risks, including fluctuating prices and loss of principal.

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