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Preparing for Retirement

In your 20s…

In your 20s, starting your career is more top of mind then what you will do when it ends. With retirement likely 40-plus years away, determining how you will afford that retirement can seem like something you worry about much later.

But building a solid base of financial habits now, can make a difference when you want to retire later.

Set Financial Goals
While setting a budget is important to controlling your spending, there are going to be large costs that you will want to pay for at any time in your life. So setting financial goals can help you determine how tight your budget needs to be.

Set your goals in three ways: short-term (less than 3 years), mid-term (3-10 years) and long-term (10+ years).

  • Short-term goals could be saving for the down payment on a vehicle and a vacation.
  • A mid-term goal could include saving for the down payment on a house.
  • Long-term goals could be to retire early or retire with money to spend on a new house or travel.

Once you have a goal to aim for, you can begin to divide up where to put your retirement funds.

Retirement Basics
Starting a career is also the time to start building for your financial future. In some employment situations, your employer will have retirement plans you can enroll in. In that case, especially if your employee offers a match, participating in the plan is a simple way to start preparing for retirement.

Whether your employer has a plan or you want to start a retirement plan yourself, learning more about the type of investments will help your make decisions.

Life Insurance Basics
Life insurance comes in three flavors: term, universal and whole. In your 20s, life insurance may seem unnecessary. But there are a number of reasons life insurance in its three forms could be for you:

  • Generally, life insurance costs less for younger individuals
  • Health concerns might limit your ability to obtain coverage later in life
  • Life insurance can accumulate cash value that can be used in retirement

Test Yourself
Understanding yourself and your financial knowledge leads to a better understanding of retirement preparation. The Financial Industry Regulatory Authority (FINRA) has set up an Investor Knowledge Quiz for you to see where your financial education strength lies.

After the quiz, you can get more information at our Financial Education section or contact a financial professional for more detailed information.

In your 40s…

In your 40s, you are generally reaching the midpoint of your career. But where are you in your retirement strategy?

Whether you have been putting money away for retirement since you started working or turned 40 with no retirement savings, this decade of your life will likely give an increased focus on your financial future.

Education and Retirement
Saving for college with a 529 plan or pre-paid tuition plan is a typical road. Whole life insurance is a way to add to your retirement funds and get added death benefit protection, but it can help pay for college.

Managing your 401(k)
Beyond monitoring the performance of your 401(k) investments, how your investments are balanced are important moving forward. Learn more about diversification.

Tax Benefits of retirement investing
In your 40s, your income is moving towards reaching its peak statistically. As your income rises, so could your tax liability. One way to reduce your current taxable income is adding that income into a tax deferred retirement investment. Learn more about retirement contributions.

Updating your beneficiaries
Designating a beneficiary tells a financial, institution or benefit provider how to proceed after you die. Having beneficiary information updated can cut down on costly escrow or estate proceedings.

In your 50s and 60s…

A recent report from Life Insurance and Market Research Association (LIMRA) states that the most common trigger (36 percent) to begin preparing for retirement is reaching a certain age. For nearly 85 percent of that group, those age triggers happen after turning 50.

A reason for that could be number of retirement milestones that occur after 50. Also, statistically this time in our career is the time of your greatest salary.

Becoming a caregiver
After 50, some of us transition from taking care of our children to taking care of our parents. Even for those with healthy parents, learning more about your parents’ retirement budget, income sources and estate planning can help in the future. Learn more about becoming a caregiver.

Annuities can be another retirement income source. It is tax-deferred, but has no annual contribution limit and can be paid out in guaranteed payments or as a lump-sum. Learn more about annuities.

Long-term care
According to the U.S. Department of Health and Human Services, 70 percent of people turning 65 can expect to need some form of long-term care during their life. Whether you prefer home health care or living in a nursing home, preparation can reduce the expense of long-term care on your loved ones. Learn more about long-term care, what Medicare covers and what the cost of care can be.

Retirement funding changes
Starting with the year you turn 50, there are rules that will change how you can prepare for retirement. During the year you turn 50, you can start making catch-up contributions to a retirement plan (such as a 401(k) or IRA). At 59½ you can withdraw money from tax deferred retirement accounts, like a 401(k), without incurring an additional 10 percent tax penalty. Learn more about those changes and others before full retirement age.

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Wela Financial

Office: 708-586-7000
Toll-Free: 855-426-9352
Oakbrook (Main Office) 800 Enterprise Dr. Ste 100 Oak Brook, IL 60523