Steps to get you started on your retirement plan

Most of us, whatever we envision for our best retirement, will want to keep our current lifestyle. Ask yourself how much money you will need in retirement. While that number is different for everyone, on average you’ll likely need to replace 70% of your pre-retirement income each year in retirement.

Start your journey by knowing where you are going

What are your goals for retirement?

We all need to slow down at some point to think about our future. What do you imagine for yourself? Depending on where you are in life, getting realistic about your goals to be sure you are saving enough for day-to-day living while considering all the extras to enjoy your time is vital. Be sure to write them down.

List all sources of income

Then, make a list including your current and future income from any savings, pensions, Social Security, annuities, traditional IRAs, Roth IRAs or other streams of income you may have, such as a side business or real estate income.

List all types of expenses

• Be sure you know the difference between needs and wants, as well as fixed versus variable expenses. Living below your means can help you reduce costs and find more money to save.
• You will also want to consider health expenses in retirement, as these costs are often not budgeted but can represent a substantial part of spending as we age.
• Also, be sure to include unexpected expenses like medical costs, future home repairs or any natural disasters not covered by insurance. Although emergencies may only happen once, it’s best to have cash on hand rather than go into debt.
• Speaking of debt, plan to cut debt before you retire to reduce your expenses so you can breathe easier.

Build a retirement budget and build in inflation

While we know you’re saving what you can now, you can find more money in various ways to give yourself a boost to save more. When you create a budget, you can manage your spending and know what to expect in the future. This will be helpful when you are building your retirement income plan and are ready to withdraw your retirement money.

And be sure to factor in inflation over time. For example, according to the U.S. Bureau of Labor Statistics, the price of a gallon of milk 30 years ago in 1995 was $2.52. In 2024, the same gallon cost $3.98 or more.¹ Costs always rise, and you’ll want to be sure you are keeping up. Saving enough to cover expenses throughout retirement is vital, as this phase of life can last 30 years or more.

Here are some reasons to save in your workplace retirement plan today

• Save automatically. Your contributions are automatically deducted from your paycheck, so it’s simple to set a little aside each pay period.*
• Help lower your taxable income. Take advantage of tax-deferred accounts to help lower your taxable income.
  • Every dollar you contribute before taxes to your employer workplace retirement savings plan reduces your taxable income, which means you may pay less in taxes today. And if you have a Health Savings Account (HSA) at work, you can enjoy triple tax savings up to and through retirement:
    • Just like your retirement plan, contributions are tax-free.
    • Any income from interest on your account is tax-free.
    • You won’t pay taxes on the money you spend on eligible health care expenses.
• Put time on your side. It is never too late to start saving, but starting earlier may be better. When you invest over an extended period in a tax-deferred account, you are taking advantage of potential compounding interest. This means any earnings on contributions go back into the account tax-deferred and can generate their own earnings over time, essentially compounding on itself. Taxes are generally due upon withdrawal of tax-deferred assets, and early withdrawal penalties may apply to withdrawals taken prior to age 59½.
• Meet your match. If your workplace retirement plan offers a match, it’s important to take advantage of this benefit. This is when you contribute at least as much as what your employer matches. For example, if you make $75,000 and your employer offers a 6% match, you contribute $4,500 to meet the match, and so does your employer. That is $9,000 earning tax-deferred in your account over the year.
• Invest your way. Another advantage to investing in your tax-deferred workplace savings rather than an IRA is potentially saving on fees. Retail IRA fund fees tend to be higher than those charged by workplace retirement plans. Fees and commissions can erode your savings growth potential over time, leaving you with potentially less.

Retirement income planning

When thinking about what to do with your retirement plan after you retire, you have many options. We suggest you speak with your financial professional to discover which is right for you.

One option that some people overlook is creating a retirement income stream (installments) from your workplace plan. If your employer’s plan allows, you can leave your money with your employer when you retire and take periodic withdrawals from your retirement savings plan account, choosing the payment cadence as a fixed-dollar or percentage amount of your account value. You can adjust or cancel at any time. This choice can help you potentially enjoy a continuation of reduced management fees and follow IRS Required Minimum Distribution (RMD) rules when the time comes while keeping your money in one place.

Although saving for retirement is up to you, you are not alone. The earlier you invest, the better off you may be. Life can change quickly, and you may want to revisit your plans and consider speaking with a financial professional. They can help guide you along your journey to help you toward realizing the kind of retirement you’ve always imagined.