What to Know About Saving for Retirement

It’s easy to believe there’s never a good time to start setting aside money for retirement. Perhaps you’ve recently graduated from college and you have student loan payments to make, or you are looking at purchasing your first home and are trying to save for a down payment. Perhaps you had your first child and are working through the expenses of raising a child.

There’s always plenty of life to get in the way of saving for retirement. However, a dollar saved today can yield so much more in retirement through the power of compound interest. $1,000 invested at age 25 earning an 8% return will be give you $21,724.52 at age 65.

“As the old adage goes, the best day to start saving for retirement was yesterday. The second best day to start saving is today,” said David Murphy, VP-Finance & Risk. “Any day you’re able to set aside money for retirement or for the future is a positive step in your financial well-being. Saving $1,000 at age 45 earning an 8% return will still give you $4,660.96 at age 65. While your investment hasn’t had time to generate the higher earnings as displayed in the example saving at 25, your $1,000 is still giving you more in retirement than saving nothing at all.”

How Much to Save for Retirement

“The amount to set aside from each paycheck boils down to how much money you wish to have when you retire,” said Murphy. “Your best bet may be to speak to an investment advisor to walk you through your plans during retirement, to account for unknown expenses, like health care, and to come up with a target balance for your retirement plan at your target retirement date.”

“Once you know how much you wish to have saved up, you can work backwards based on assumption of how many years you plan on working and what rate of return you anticipate earning on your savings to determine how much you need to save each paycheck,” he added. “If your employer offers a 401(k) or 403(b) plan, you may have access to planners or planning tools to help you make these calculations.”

There are several factors to consider when determining target retirement savings. Questions to address include: Will you be traveling in retirement? Will you be a snowbird and live your winters down south while spending summers up north? Will you continue to own a home, or will you downsize to a condo or an apartment? Do you anticipate health issues and think you’ll need more money set aside to cover health expenses?

What Does MMCCU Offer for Retirement?

MMCCU offers Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) to help save for the future and to account for the ever-growing costs of health care.

“Both products have tax advantages tied to them, but you will want to speak with your tax advisor to determine if these accounts can help you lower your tax liability,” said Murphy.

“In addition to the products discussed above, we’ve partnered with FocusTax Solutions based out of Brookfield and work with Neufeld Capital Management locally to provide educational seminars to help prepare individuals for retirement, what to expect with health care, and how to navigate Social Security and Medicare,” he added. “You can check with us to see when the next workshops are occurring, or feel free to reach out direct to Chris or Deanne at Neufeld Capital Management for more information.”