Whether you’re just entering the workforce or sliding into your 60s, here’s how to maximize your efforts and give your retirement fund a fighting chance.
I’m just starting my career. What should I be doing now for my future self?
If you’re just kicking off your professional life, your golden years probably feel like a lifetime away. But folks in this camp have one major advantage — time. Thanks to the power of compound interest, the earlier you start building your nest egg, the more you’ll have come retirement.
“Start by understanding your employer’s retirement plan, which will let you put money aside on a pre-tax basis and allow your money to grow tax free,” says Emily Wrightson, director of the Cammack Retirement Group. “Kicking in enough to get an employer match [nets you] free money that you’re otherwise leaving on the table.”
If you don’t have a 401(k) through your job, consider opening an IRA. There are two types: traditional and Roth. Contributions to a traditional IRA might be tax deductible and you will pay taxes on the gains when you withdraw the money in retirement. A Roth IRA allows you to contribute after-tax dollars which can grow tax free and you can tap into it during your retirement without incurring taxes (you already paid them!)
Automate your saving effort — say, having a certain amount automatically transferred from each paycheck. Opening an IRA can also help break the ice with a financial advisor.
That’s great, but I feel like I really don’t have enough money to be saving for retirement.
There are two sides of the coin to consider: boosting your income and reducing your expenses. When it comes to the former, make sure you’re earning what you’re actually worth.
“While 57% of men negotiate their first salary, only 7% of women do,” says Heather Ettinger, founder of Luma Wealth. “Here’s the good news: 89% of those women who doget what they’re looking for.”
What about freeing up money to funnel toward retirement? It begins with understanding where your paycheck is going. Enter budgeting, which really just means getting a grasp on the inflow and outflow of your money.
I’m getting married! How will it affect my retirement planning?
“One of the points of contention within marriage, unfortunately, is money, so getting on the same page on the front end is incredibly important,” says Scott Thoma, retirement strategist and principal with Edward Jones. “How do each of you view money? What are your thoughts on spending now versus spending later?”
If the two of you have wildly different relationships with money, Thoma says the key is finding some middle ground. Work together to identify joint retirement goals, then establish a plan for getting there. An experienced financial advisor can help you strategize and bring things into focus.
How do I balance a growing family and saving for retirement?
It’s no secret that raising kids is expensive, but going in with open eyes can help keep your retirement plan intact.
“So many women come out of the workforce to raise kids, and it’s really important to understand, from a planning perspective, what that means for your financial picture,” says Wrightson. “Leaving your job for a few years means pressing pause on your income and retirement contributions, while staying in the workforce may translate to a hefty childcare bill.”
In other words, it’s all about tradeoffs. It’s important to look at all the factors, then figure out what makes the most sense for your family. If you do temporarily freeze your retirement contributions while in caregiving mode, make a plan for catching up down the line.
As a single woman, should I be planning differently?
Whether you’re partnered or not, you need a stable emergency fund: It’s the foundation of financial health. Without it, you’ll be reaching for a credit card — or your retirement stash — every time you encounter an unexpected expense.
“It’s even more important for single women to have an emergency fund because they don’t have that dual income to fall back on should they encounter something like job loss,” says Wrightson. “Saving up six to nine months’ of living expenses is a great target.”
For years, I’ve been contributing to my 401(k) to get my employer match. Am I doing enough?
It all begins with setting goals. While none of us know exactly what life will look like come age 65, we can start thinking about the kind of lifestyle we’d like to have. Is it similar to how you’re living today? If so, how much do you need to start saving to sustain that lifestyle in retirement?
“It’s taking something that’s very large and scary and breaking it down into bite-sized pieces,” Thoma says. “If saving 3% with a 3% match isn’t going to get you to your goal, what’s your plan to bring that up over time?”
Jenine Garrelick, senior managing director at MFS Investment Management, has a simple hack that won’t feel overwhelming: every year, increase your contribution by a percentage point or two. You might do this if you get a raise each year. Money you don’t have yet is money you won’t miss.
I haven’t hit my retirement target yet. What can I do to catch up?
First, if you’re in the home stretch of your career and you’re feeling this way, you’re not alone. According to a recent GoBankingRates survey, 42% of Americans have socked away less than $10,000 for retirement.
“The best time to start is always now,” says Thoma, who adds that both 401(k)s and IRAs allow you to make additional catch-up contributions once you turn 50.
But kicking up your contributions shouldn’t stretch you so thin that you’re financially strapped in the present. If this is the case, Wrightson says it may be wiser to delay your retirement and work a little longer than planned: “Working part-time, instead of going from a steady paycheck down to zero, can be a nice transition that gives you a little buffer before Social Security starts coming in.”
Speaking of Social Security, understanding all the nuances here is anything but simple. This is when working with a financial advisor becomes helpful.
“Most women think they don’t have enough money to work with a professional, but there are advisors out there willing to work with women of all levels,” says Ettinger. “They can help you look at everything holistically based on what your needs are, then make the best financial plan of attack.”