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Retirement Planning Considerations for All Ages

Retirement Planning Considerations for All Ages

October 21, 2022

At Compass Financial Services, our advisors work with Iowans to help work towards their financial goals and a comfortable retirement. Creating a retirement plan has many benefits. It allows you to invest now for financial security when you retire. Our financial advisors in Des Moines work with Iowans of all ages to create a plan based around a number of retirement planning considerations. We want to help you prepare for financial security after retirement based on your unique situation and goals.

When to Start Planning for Retirement

It is never too early to start planning for retirement. In fact, the sooner you get started the more likely you’ll be able to set yourself up for success. Additionally, retirement may not always happen when you expect and early planning can help you better prepare for the possibility of an early retirement. Learn some of the most critical retirement planning considerations we recommend for each age group.

Saving for Retirement in Your 20s

When you’re in your 20s, you likely just got out of school and have student loans to pay off, or if you’ve been working but haven’t had the years and experience to grow your income. These spending habits from our financial advisors will help you develop a budget that’s easy to follow and set yourself up for financial success later on.

  • Start Budgeting. When you start planning for retirement or begin paying closer attention to your finances, we recommend creating a budget that is both effective and simple for you and your family to follow on a monthly basis. Maintaining a budget will reveal any areas you might be overspending and will help you track if there’s any left-over income you can use to put towards your savings.
  • Work Towards Paying Off High-Interest Debt. Our second tip for anyone who is saving for retirement in your 20s is to pay down any high-interest debt. High-interest debt can come from student loans, credit card debt and more. By paying off high-interest debt first, you can reduce the overall amount of interest you pay and decrease your overall debt. From there, continue to pay down debts with the next highest interest rates to save on your overall cost.
  • Begin Your Investment Journey. Our last tip for 20-somethings to save money for retirement is to start investing. Whether it’s through an employer 401k, an outside IRA or even a general investment account, the sooner you begin developing the habits of investing, the better your long-term time horizon will benefit you.

Saving for Retirement in Your 30s

At this stage in life, responsibilities start to pick up. Many people buy their first home and begin growing a family. It’s easy to think that saving for retirement in your 30s is difficult, but as your pay increases, it's even more important you’re able to balance spending with saving. To help, our advisors share a few of the best ways to save money for retirement in your 30s.

  • Add More Money Towards Retirement Accounts. Once you get into your 30s, it’s likely your career is more established and your income has had time to grow. Our financial advisors recommend utilizing that growth to add more money towards your retirement accounts.
  • Continue Paying Off High-Interest Debt. As we mentioned, once you’ve paid off any high-interest debts like student loans or credit cards, continue to pay down debts with the next highest interest rates to save on your overall cost. This is valuable practice to continue until all high-interest debts are paid off.
  • Review Your Investment Plan. As you’re planning for retirement in your 30s, it’s a good time to review your investment plan. By understanding how your money is invested, considering the risks and rewards balance you’ve established can help you make better informed decisions with your money.
  • Set aside savings for big expenses. Our last retirement planning consideration for this age group is to set aside money for additional major expenses down the road. These can include things like saving for your children’s college education, a new car, house, etc. That way when those major expenses come up, you won’t have to reduce the amount of money you’re putting into your retirement plan to pay for them.

Saving for Retirement in Your 40s

Financial planning in your 40s can be exciting as your family continues to grow. It’s a great time to go back to the good financial habits you developed in your 20s and 30s and expand on them. Below are tips from our advisors to help anyone saving for retirement in their 40s.

  • Increase Retirement Contributions. We recommend increasing your retirement contributions. Increasing contributions by 1% every year is our rule of thumb here at Compass Financial.
  • Review Contribution Accounts & After Tax Investments. Start enhancing your contributions for non-qualified accounts as well, like investment accounts where you can put after-tax dollars to work.
  • Utilize Health Savings Accounts (HSAs). Set aside money for future health savings by setting up an HSA. There are many advantages to doing so, including pretax contributions, HSA funds potentially grow tax-free and when used to pay for eligible medical expenses, HSA withdrawals are tax-free.
  • Begin Estate Planning & Check Your Life Insurance Coverage. Beyond saving for retirement in your 40s, we recommend checking your life insurance coverage to ensure your loved ones are taken care of if the unexpected happens. Also ensure all beneficiaries are up-to-date.
  • Plan Ahead by Having a Will. A written will is a very important retirement planning consideration. It ensures that your intentions for your finances are fulfilled once you pass.

Saving for Retirement in Your 50s

Mid-50s seems to be the age that people start taking retirement seriously. Now is the time to start considering when you want to retire and if you’re saving enough per month to achieve that goal.

  • Set Retirement Expectations. Start reviewing where you’re at financially and create realistic expectations about what you need for retirement. You’re closer to retirement and should be able to get a closer view of what you’re going to need to get there.
  • Adjust Your Mindset on Investments. If you’re saving for retirement in your 50s, investments should shift from a growth mindset to more conservative options for a secure income after you retire. Our advisors recommend you start tracking if your investments are bringing in enough money each month to replace your income as they will become your primary source for spending.
  • Consider What Your Taxes Will Look Like After Retirement. You will owe federal income tax at your regular rate as you receive the money from pension annuities and periodic pension payments. But if you take a direct lump-sum payout from your pension instead, you must pay the total tax due when you file your return for the year you receive the money. Understanding what taxes will look like ahead of time can help you prepare.

Saving for Retirement in Your 60s

When you’re planning for retirement in your 60s, it’s important you start thinking about how you will continue to save after retirement. Will the resources you’ve continued to grow over the years continue to generate income, and if so, for how long? The tips below can help!

  • Create a Realistic Budget For Your Retirement. Now that you’re nearing your retirement, it’s critical you have a budget to follow now that your primary form of income no longer exists.
  • Review Your Resources. Determine how far your savings, investments and other resources are going to last. By understanding how much income you can expect from those resources and for how long they’ll continue to generate that revenue, you can determine and plan a realistic date to retire.
  • Take your social security and pension into consideration. You are now at a time in your life where you can decide when you want to start collecting retirement benefits. If you choose to retire and begin receiving benefits when you reach your full retirement age, you’ll receive your full monthly benefit amount. If you retire before your full retirement age, the amount will be reduced. By knowing what you will get every month in retirement benefits, you can better plan and prepare for retirement.
  • Continue Shifting Your Investments. You’re at a stage where you’ve spent your life investing to save money for retirement and you can now begin investing to spend money. It’s important to always reevaluate your strategy to make sure it fits your goals.

Consult With Compass Financial to Find the Best Ways to Save Money For Retirement

At Compass Financial Services in Des Moines, we offer retirement planning services to give Iowans the best chance for a comfortable retirement and financial security. Contact our financial advisors today and get a complimentary initial consultation with one of our experienced advisors to learn more about retirement planning considerations and how you can save money. We will work with you to create a customized plan that helps you pursue your financial goals. Get started!

* The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

*The information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.