The PBS Frontline documentary The Retirement Gamble continues to spark discussion, both pro and con. In a prior post I discussed Winning The Retirement Gamble: Step 1 Adjust Your Mindset. Once you have the right attitude you can start on your journey to retirement.Saving for retirement is like any journey, it has a starting point and a destination. No matter whether you are a 20 something with many years to go or you are in your 50s with retirement on the horizon, it is important to periodically take stock of your resources for retirement. What have you accumulated, how much are you saving, and what other resources do you anticipate having available to fund your retirement? You need to ask: Where do I stand?
Take stock of what you have
The first step in financial planning for any life goal is to determine where you are. Ask questions such as:
- How much do I have in company retirement accounts such as a 401(k)?
- How much do I have in my IRA(s) both Traditional and Roth?
- How much do I have in taxable accounts such as a brokerage or mutual fund account?
- How much do I have in various bank accounts including savings accounts, money market, and CDs?
Additionally:
- Check your Social Security statement both to understand what your benefit might be at a given age and to ensure that all earnings have been fully credited.
- Understand the details of any pension benefits from a current or former employer.
- Determine what other resources you might have available such as deferred compensation, annuities, an interest in a business, etc.
Determine what you can save for retirement
Take a look at your budget at least annually and determine if you can increase your retirement savings. Ideally this will be done in conjunction with a financial plan so you have an idea of what you will need to accumulate for retirement. Ask yourself questions such as:
- Am I maxing out my company retirement plan contributions? If not can I afford to increase my salary deferrals?
- Am I contributing to an IRA?
- Am I eligible for stock options or restricted stock awards?
- Can I afford to invest in a taxable account via methods such as dollar cost averaging or period contributions?
- Am I due a bonus in addition to my regular compensation?
The lists above are hardly exhaustive, but it is important that you periodically take a look at all of your assets. Determine what has been or can be set aside for retirement. This is the first step in your retirement financial planning.
The second step of this process is, of course, determining what you will need to have set aside for retirement. This is the essence of doing a financial plan and we will cover that in a subsequent post.
Please feel free to contact me with your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.
Please check out our Resources page for links to some additional tools and services that might be beneficial to you.
Photo credit: Wikipedia
I set up a nice excel file that takes me out through 65 to be sure I have enough saved to start using 4% withdrawal of nest egg + social + pension to be sure I’ll have enough in present dollars to live a similar lifestyle. So far I’m on track but the next 20 years are just as important!
Thanks for the comment. Sounds like a pretty useful spreadsheet and also sounds like you are doing the right things as far as tracking your progress towards retirement.
I am young, but I feel like the biggest part of planning for retirement is actually having a plan. I am like Darwin’s Money where I have a spreadsheet with estimates of gains, contributions, etc. and can really plan ahead for retirement even though it may be light years away.
Jake thanks for your comment. I agree that having a plan and tracking where you are are two key elements in being successful at saving for retirement.
Great breakdown Roger. Like he other’s I have an excel spreadsheet tracking what I am doing and have that aligned with our investment plan. I find that having that plan, and actually putting meat on the bones of it, really does help keep us focused and active in our investment goals.
Thanks John. The fact that you are tracking your progress and working to a plan are both great steps on your eventual journey to retirement.
This is a good way to get your finances together and figure out how much ground you need to make up. Especially when you factor in your Social Security benefits do you realize how much extra you will need to meet your goals. The other great thing about this approach too is that it makes you aware of when each of these various funds will become available – that is really important especially if you plan to retire early.
Like anything, retirement is a journey and if you don’t know where you stand at any point in time you likely will never know if and when you’ve arrived at your goal.