My office recently held a mid-career retirement seminar. I probably should have attended, but I didn’t. Unfortunately, due to the need to balance staffing, some slightly older (though not necessarily senior) members of my team attended and I held back. After all, I’m still early in my career, and there will be other seminars.
It was interesting to hear reactions to the seminar though. One coworker popped in and out of the office. During his first break, he was really motivated and excited about the information. By the end, he was lamenting that he would never be able to retire.
One of the biggest keys to retirement planning is apparently realizing just how many years you may need your money. They were directed to a calculator at Living to 100. Lucky me, I’m expected to live well into my 90’s according to that calculator. How accurate is it? Who knows, but it’s a good starting point. And it’s a lot of years too.
At my current job, I’m technically eligible to retire at age 58. I have no plans to retire at 58 unless something major changes in my financial situation. I’m not able to sock away enough money right now to even consider retiring then. Well, I take that back. I possibly could be socking away more money now, but then I would have to cut back on the things I love, like triathlons and travel. It’s not a sacrifice I’m ready to make.
One of the biggest takeaways from the training was to be sure that you’re taking advantage of all of your retirement opportunities. If your company has a 401k plan, you should be investing in it. Especially if the plan offers any sort of match. I have a match up to the first 5%, so from day one, I’ve made sure to contribute that 5%. Otherwise, you’re just throwing away free money.
If you are eligible, you should also have a Roth IRA. In 2015, to be eligible for the full $5500 contribution, you need to make under $116,000 or filing jointly, under $183,000. If you make a little bit more than that, you may still be eligible to contribute a smaller amount. The big key here is to start contributing to your Roth IRA as soon as you can. Why? Well, I think we would all like to be making over $116,000, and someday, it may happen. So make sure you’re contributing now and giving your money as much time to grow as you possibly can.
Other important considerations? Think about your living expenses. If you live in what you expect to be your forever home, see if you can pay off your mortgage before you retire. If I stay in my current house, that’s definitely in the plans. I will have significantly lower expenses once I no longer have a mortgage payment. I’m not currently making extra payments, but maybe someday I will.
The big thing that my coworker came back with was that small steps are just as important as big ones. So many people look at the idea of retirement and get overwhelmed at how much money they need to save. Instead of beginning to put away funds, they just shut down and don’t save anything. That is not the best method. If you can only save a little bit of money every year, that’s what you should do. If you want to open a Roth IRA but don’t have enough money to open one (some require an initial investment and then allow smaller investments afterwards), set aside what you can in a separate bank account until you can afford to open that Roth IRA. Take tiny steps now and do what you can and don’t get overwhelmed.
Plan now so you can enjoy life later.