The Quest for Financial Wellness: Saving for Retirement

The main goal of saving for retirement is to ensure you have enough financial resources available when you stop working to improve or sustain your current lifestyle in retirement years. How much you need to save will depend on how you want to spend your retirement. Do you want to travel, do you want a second home, do you want to spend it on grandkids, or build a legacy of wealth to pass to your heirs?

Leading financial planners believe your retirement income range should be between 70% and 80% of your pre-retirement income. If you are looking to improve your standard of living during retirement, you will need to increase that percentage level of savings.

What is your current retirement saving plan?

Most employers have access to several retirement planning vehicles for their employees to take advantage of during their time of employment. Teachers have access to the State Teacher Retirement System (STRS), 403b plans and 457 plans. Hospitals and other qualified nonprofit organizations have access to 403b plans. Are you currently contributing to your employer plans? If not, you should start saving now. If your employer will match contributions, it’s free money towards your retirement.

Pay Yourself First

Before you pay bills, set aside a portion of your income in a retirement savings plan and pay yourself. This is a money saving habit you should live by during the earnings accumulation phase of your life. Delaying saving for retirement will significantly hurt the long-term potential for meeting your retirement needs and may delay the retirement lifestyle you seek.

Waiting several years before starting your retirement savings can cost you thousands of dollars due to compounding interest and earnings. Our advice is to start now, even if you must start small. It’s well worth it in the long run!

For example, suppose you have a current salary of $30,000, receive 4% annual raises, and plan to retire in 30 years. You put 4% of your salary into a retirement plan each year and earn an 8% annual return.

• If you started investing today, you’d have $220,944 when you retire in 30 years.
• If you waited 5 years before investing, you’d have $164,878 (assuming the same retirement date, salary, raises, savings rate and return).
• In this case, waiting five years would cost you.

Increased Retirement Contributions and Student Loan Forgiveness

Fiducius can help you reduce or eliminate your monthly student loan payment through forgiveness or refinancing. Wisely using that new cash flow to start saving or save more for retirement, allows you to experience debt reduction (saving on your monthly student loan payment) and asset accumulation (building your retirement nest egg) at the same time.

Starting the habit of saving for retirement, or contributing more, allows you to further reduce student loan payments in future years because added retirement contributions are pre-tax. Pre-tax contributions lower your adjusted gross income, which lowers your monthly student loan payment. If you receive 2% increases in pay each year and you increase your retirement by 2% each year, you can keep your income driven student loan payments relatively the same.

Individual Retirement Accounts (IRA)

Individual Retirement Accounts (IRA) can be great ways for additional retirement savings. Traditional IRAs will provide additional pre-tax deductability to further decrease your student loan payments. There are special rules for IRAs depending on your tax filing status.

Please consult us or your financial professional for more information on IRAs.

Start Your Financial Wellness Plan Now

Contact Fiducius to find out how we can start your retirement savings plan now.