February 2023

The earlier you can start putting money away for post-work life, the easier it'll likely be to pay for the retirement lifestyle that you want- when you want it. That said, it's never too late to put a plan in place.

No matter your age, it's helpful to spend some time thinking about what your ideal retirement will look like. How old will you be when you call it quits ? Will you work part-time? Maintain multiple homes? Travel the world? While answers to these questions will likely change over time, especially if your still in the early stages of your career, considering them can provide motivation to save. Here are some tips on saving and investing for retirement, no matter what stage of life you're in right now.

You likely have a lot of competing priorities during these years, including buying a home, staring a family, or simply trying to balance your budget and pay off student loans. While it's important to focus on these short term milestones, establishing a realistic retirement savings plan can help in the long term.

Recognize the power of compound interest 

The beauty of saving for retirement when you’re young is that you’ve got decades for your money to potentially grow. This is prime time to put the power of compounding-the process of earning interest on your interest -to work. When you first open a retirement account, your initial deposit can grow by the percentage you earned in returns and/or interest annually; the next year, however, you have the potential to earn on the original amount you put in as well as the returns/interest you earned last year. It may not seem like much at first, but over time it can add up.

Prioritize your savings

Spending less than you’re earning, but not sure what to do with the excess cash? Consider this hierarchy:

· Build an emergency fund

· Aim to get the match

· Paydown revolving debt

· Maximize 401K and HSA contributions 

For the 2022 tax year, individuals can contribute up to $19,500 to their 401K. The HSA contribution limit for the 2022 tax year is up to $3,600 for the individual coverage or $7,200 for the family coverage. Individuals can contribute $20,500 to their 401K. The HSA contribution limit is $3,650 for individual coverage or $7,300 for family coverage. Contributing as much as possible not only helps you save for the future, but also lowers your taxable income for the year

· Fund an Individual Retirement Account (IRA)

· Consider a brokerage account

Consider Life Insurance 

For people with dependents, especially young families, life insurance can be a critical part of a well-rounded financial plan. Term life insurance can provide your loved wones with a cash benefit (typically income tax-free) in a worst case scenario. They can use it to pay a mortgage, cover college tuition, keep a business running, or simply continue to meet everyday expenses.

You’re likely earning more money by now, but you may also be facing more financial responsibilities like children’s college tuition or caring for aging parents. Not to mention: Retirement is approaching as well, so you’ll need to consider balancing your investing strategy to address your current needs while keeping an eye on the future. 

Revisit your asset allocation

Diversifying investments across stocks, bonds, and cash can help you manage risk while maintaining growth potential. Being too conservative (e.g., staying all your cash ) can be just as risky as being too aggressive, especially when factoring in inflation.

Streamline Accounts

By the time you’ve reached this stage in your career, you may have built up multiple 401K plan accounts through former employers. Keeping your money in one place can make monitoring and allocating your assets much simpler—but consolidation is not right for everyone, so carefully consider your options. 

Catch Up

If you’re age 50 or older, special “catch up” contributions are a great way to give your retirement savings an extra boost. In 2022 you may be able to contribute up to an extra $6,500 to a 401K and up to an extra $1000 to an IRA. Similar “catch up” contributions are available for the HSA’s if you’re 55 or older, allowing you to contribute up to an extra $1,000 to an HSA. Once you’ve made it to retirement age, it’s typically time to start shifting your focus from building up your nest egg to enjoying it. Of course, you’ll want to make sure that the income stream you create not only meets your lifestyle needs now but also cover future costs like healthcare. 

Build a Budget

Guaranteed income, such as from Social Security, pension benefits, or annuities can help pay for your essentials. 

Mind your RMDs 

If you have a 401K plan , IRA, or other qualified retirement plan, the IRS requires that you take a required minimum distribution (RMD) starting in the calendar year in which your turn age 72 (if you were born after June 30 1949) or age 70 ½ (If you were born before July 1, 1949) Note, however, for a 401K plan or other qualified retirement plan (other than IRA based plan), if you are still employed by the plan sponsor and are not a 5% owner, you may not need to take a RMD.

If the amount will be much larger than you need, you may want to “smooth out” distributions, starting earlier in retirement to prevent higher income levels (that could push you into a higher tax bracket) in any given year.