How to Start Planning for Your Retirement in the Latter Part of Your Career

Financial Advisor

Most financial experts recommend starting retirement planning at the beginning of your career, ideally in your 20s and 30s. There are several benefits to this. You get more time to plan. Your money gets more time in the market to grow. And you can recoup from losses, if any, and optimally save up for the future. However, not everyone gets a good start in their careers early in life. Sometimes, it may take time for you to get on your feet. Other times, you may not pay enough attention to retirement planning when you are younger. No matter how late, it is prudent to start retirement planning, even if you are in the latter part of your career.

financial advisor can help you understand how to plan your retirement income for your post-career years. This article will also explore ways to boost your retirement savings in the later years of your career.

How much money do you need to save for retirement?

While there is no fixed sum for a retirement nest egg, you should be able to calculate your needs based on your current expenses, lifestyle, income, health, age, and other similar factors. People with health issues may have more medical expenses in retirement and need to save more. Likewise, people living in bigger cities may spend more on their lifestyle needs than those in smaller towns. Factors like state taxes can also impact your retirement expenses and dictate your savings strategies for retirement. It is essential to consider all of these aspects and take help from a financial advisor to determine the right target for your retirement pool.

There are several retirement calculators that can help you determine your retirement savings target with greater ease. These online tools are easy to use and offer quick and accurate results to help you plan for your future without errors.

What is a good amount to save for your retirement?

A general rule of thumb is to save up to 70% to 80% of your pre-retirement income. For example, if you earn $100,000 per year right now, you can aim to have at least $70,000 to $80,000 per year for your retirement income. Your retirement income can come from a combination of sources, including Social Security benefits, pension plans, stock returns, bond interest payments, and personal savings. Another common rule is to save at least 10 to 12 times your current annual income for retirement. So, if you make $100,000 per year, you should aim to have $1 million to $1.2 million in your retirement nest egg by the time you approach your retirement age. It is essential to start saving for your retirement as early as possible and to regularly contribute to your retirement accounts, such as 401(k)s or Individual Retirement Accounts (IRAs), and investments like mutual funds, stocks, bonds, etc. The earlier you start, the more time your money has to grow through compound interest, which can significantly increase your retirement savings over the course of time. But it is never too late, and what matters is starting when the realization hits you.

Here are 7 steps you can take to plan for retirement in the latter part of your career:

Planning for your retirement is essential to ensure financial security in your golden years. If you are in the latter part of your career and have not started preparing for retirement, there is no need to panic. Read below for the steps you can take to start.

1. Assess your current financial situation

The first step in planning for retirement is to assess your current financial situation. This will give you an idea of where to start and how long it might take you to reach your goal. You can start by checking your current assets, debts, and expenses. Go through your assets thoroughly to clearly understand your financial standing. Make a list of assets, including your home, stock investments, bonds, mutual funds, savings accounts, 401k accounts, IRAs, and any other valuable assets you may own. Next, list all your debts, including credit card debt, mortgage, car loans, and any other outstanding loans. Finally, list your monthly expenses, including utilities, food, insurance premiums, rent, and other recurring expenses. Try to be as detailed as possible, and do not miss out on anything. The more elaborate your list, the better decisions you can make about the future.

2. Estimate your retirement expenses

Once you have a clear understanding of your current financial situation, the next step is to estimate your retirement expenses. This includes basic living expenses such as housing, food, etc., as well as discretionary costs such as travel and hobbies. You must also include taxes, such as estate taxes, state taxes, property taxes, inheritance taxes, and others. Additionally, you must consider the lifestyle you want in retirement and the expenses you will need to meet that lifestyle. This may include travel, hobbies, and other activities you want to pursue. Healthcare is another significant expense in retirement. Medical expenses can include hospital stays, prescription drugs, at-home care, nursing homes, and more. While insurance and Medicare may cover some of these, you may have to spend out of your pocket too. Preparing for any eventuality is better than facing financial hardships later.

3. Evaluate your sources of retirement income

Your sources of retirement income include Social Security, pension plans, stock returns, real estate returns, bond interest payments, and personal savings, among others. Consider all the sources of retirement income you will have and estimate how much income you will have in retirement. Start by checking your Social Security statement to see how much you will receive in retirement benefits. If you have a pension plan, determine how much you will receive in retirement income. Also, consider any other sources of retirement income, such as rental or investment income. If you have an employer-sponsored 401k, check its balance. If you are not investing up to the contribution limits for the year, start maximizing your contributions.

4. Create a retirement savings plan

You must create a retirement savings plan based on your estimated retirement expenses and income. The plan can include how much you need to save each year to accomplish your financial goals. It should state the retirement accounts to use, such as a 401(k), IRA, annuity plan, pension plan, etc., to reach your retirement savings target. Setting realistic retirement goals is essential. While you may be at a later stage in your career and may sense the urgency, it is essential not to neglect your present needs completely. Therefore, keep a rational outlook and plan to save enough every month or year so as not to compromise on your other financial goals. When creating a retirement savings plan, you must have a fixed target in mind. This can help you stay on track and monitor your progress. You can aim to save at least 10 to 12 times your current annual income by the time you retire, or at least 70% to 80% of your pre-retirement income. Another thing to pay attention to is your emergency fund. An emergency fund is essential as it helps you combat unplanned expenses, such as job loss, medical emergencies, home repairs, car repairs, etc. It can help you stay afloat during financial hardships without hampering your other financial goals or adding to your debt. Make sure to keep your emergency fund a part of your retirement savings plan.

5. Maximize your retirement contributions

If you are over 50 and wondering how to make your 401k grow faster, you may consider making additional catch-up contributions. The maximum contribution limit for 401(k)s in 2023 is $22,500. If you are over 50, you can make a catch-up contribution of up to $7,500 per year. If your employer offers an employer match, you can earn much more and save a considerable corpus for your retirement needs. If you have not been contributing to a retirement account, start as soon as possible. You can contribute up to $6,500 for Traditional and Roth IRA accounts if you have an IRA. The catch-up contribution limit for those over 50 is $1,000. Retirement accounts like the 401(k) and the IRA offer many tax advantages, which makes them ideal for retirement savings. You can hire a financial advisor to know more about them. Exploring other retirement savings options, such as a Health Savings Account (HSA), money market accounts, immediate or deferred annuity plans, and others, is also a good idea. These accounts can offer additional tax advantages and help you maximize your retirement savings.

6. Consider delaying retirement

If you need to catch up on your retirement savings, consider delaying your retirement. Delaying your retirement by even a few years can considerably impact your retirement income. The more time you have to save, the more you can contribute towards Social Security benefits, retirement accounts like the 401(k), etc. Delaying your retirement can also give you more time to pay off debts and reduce expenses, improving your overall financial situation. Moreover, the longer you work, the shorter your retirement will be. This means you can get by by saving less money since the retirement period is cut short. However, delaying retirement may not be ideal for everyone. It can impact your health and come in the way of your personal life. Therefore, you must consider the pros and cons of delaying your retirement before making a decision.

7. Seek a professional financial advisor’s help

If you are uncertain about planning for retirement at the latter stage of your career, consider seeking professional advice from a financial advisor. A financial advisor can help you create a financial plan tailored to your unique situation. They can help you assess your present financial standing, estimate your retirement expenses and income, and develop a retirement savings plan suitable for your age, profession, assets, and liabilities. A financial advisor can also help you steer complex retirement savings options and provide advice on investment strategies. They can also help you adjust your retirement plan as your circumstances change over time. For instance, you may have ups and downs in your career. You can earn more, lose your job, receive a bonus, etc. All of these events can influence your retirement planning decisions, and a financial advisor can be the right person to take advice when such a situation arises.

To conclude

Planning for retirement is essential, no matter what stage of your career you are in. While it is recommended not to delay retirement planning, it is not too late to start, even if you are in the latter part of your career. Start by assessing your current financial situation, estimate your retirement expenses and income, and create a retirement savings plan that fits your needs and future financial goals. If you need help along the way, it is advised to get help from a professional financial advisor. Use the free advisor match service to find a financial advisor who can assist you in building your retirement nest egg in the latter part of your career. Answer some simple questions about your financial needs, and our matching tool will connect you with 1-3 advisors who can best fulfill your financial requirements. For more retirement tips and strategies for your specific financial situation, visit Dash Investments or email me directly at dash@dashinvestments.com.

Sincerely,

jonathan dash

Jonathan Dash
Founder and President
Email: info@dashinvestments.com