5 Career Checkpoints on the Road to Retirement
It's National Save for Retirement Week, so you'll likely see a lot of information, tools and resources about saving for retirement through your workplace plan, like a 401(k) or 403(b). Although there are basic tips that apply to everyone, considering steps relevant to different stages of your career helps ensure your retirement readiness.
According to a M.O.O.D. of America study, conducted by Lincoln Financial Group and released this year, most Americans are taking a careful and deliberate approach when it comes to their retirement plans. Among those who feel prepared, 77 percent believe they have saved enough to cover retirement expenses, and 64 percent will be free of debt during retirement.
We live in a time where saving for retirement is your responsibility. There are actions you can take throughout your career to help you get and stay on track with your retirement goals. Here are five checkpoints to consider on the road to retirement:
First job. In your 20s, you may think you have all of the time in the world to save for retirement. The reality is saving early gives you the opportunity to make your money work for you, with compounding interest. It can be tempting to spend your entire paycheck, particularly if you're just entering the workforce and have debt and other spending priorities. Today's living expenses including monthly bills, housing and other necessities, which make it difficult for 77 percent of millennials to plan or put money toward their future, according to the same Lincoln Financial survey.
Create a budget to help manage and prioritize expenses, so you can get in the habit of making retirement savings a priority too. Whether you're starting a new job or interviewing for one, check out the retirement plan benefits offered by your employer. And as soon as it's available to you, enroll in your employer-sponsored retirement savings plan.
Save at least up to the company match at this time so you don't leave money on the table. If your company doesn't offer an employer-sponsored retirement plan, consider saving in an individual retirement account, or IRA. Most local banks have an IRA solution that could work for you.
Changing or in between jobs. Throughout your career, you may find yourself in between jobs or ready to pursue a new one. Nearly 60 percent of workers feel they would be prepared if something disrupted their income for the next year, according to the 2014 Lincoln Financial survey. To help you better prepare for life's unexpected events, it's important to build emergency savings to cover at least a few months' expenses.
This will help you to resist the temptation to borrow from your retirement savings. Keep in mind, if you do take a loan from your plan, you may miss out on potential market gains, and could even incur taxes and penalties for not paying the loan back. When you get back to a place where you have a steady income, resume saving as much as you can.
Before making the move to a new position, consider the employer's retirement benefits as part of your overall compensation package. Learn about the company match, investment options, resources and the different types of support available to help you get on track with retirement savings. Once you've made the move to a new job, consider consolidating assets from your previous plan. Be sure to meet with a financial professional to go over plan options that are well-matched with your saving goals.
Midcareer. Expenses incurred during the middle of your career can often change the trajectory of your retirement savings. Whether you're saving for a child's education, buying a new car, making home improvements or paying your mortgage, saving for retirement may feel like a lower priority on your savings list. Now is the time where you may be tempted to reduce your contributions or stop saving all together. Resist the temptation. Keep up your momentum and continue to save as much as possible from every paycheck.
Meet with a financial professional to help look at your entire savings picture and assess the best ways to help stay on course. A Lincoln Financial Group participant satisfaction survey released last year found that people who have access to guidance from a financial professional, like a retirement consultant, are 35 percent more confident in their retirement readiness.
Career advancement. Save more as you make more. As you progress in your career, you'll likely get a promotion or a bonus that boosts your income. Consider putting any extras from bonuses, salary increases and other cash inflows toward retirement savings. If you've maxed out your contributions in your employer-sponsored plan, ask a financial professional about other savings and investment options that are right for you at this time in your career.
Near retirement. You're almost ready to retire and want to make sure you have a plan that gets you to and through retirement. Keep your contributions going and meet with a financial professional to balance your investments. It's also important to make sure you are debt-free as you enter retirement. If this isn't feasible, you'll want to have a plan for managing the debt you still have on your personal balance sheet.
For savers approaching their retirement years, take advantage of income guarantee options that may be available in your plan. Nearly 85 percent of older boomers who feel prepared for retirement say they have a guaranteed income source they can depend on, according to the 2014 survey. It's also important to understand Social Security benefits in addition to the other income sources you've secured along your savings journey.
Whatever career stage you are in, take advantage of all the opportunities you have to save and the resources available to help you get to and through retirement successfully. If you do, you can boost your retirement readiness and feel better prepared for the road ahead.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Chuck Cornelio is President of Retirement Plan Services for Lincoln Financial Group and is responsible for the firm's employer-sponsored retirement plans business. Cornelio also serves as the company's Chief Administrative Officer and oversees the enterprise-wide Shared Services and Information Technology functions. Cornelio made 401k Wire's list of "Most Influential People" in the industry in 2013. He was also a founding member of the SPARK Institute and a former Governing Board Member.
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