Planning for Retirement 101

When thinking about retirement, most of us have an ideal image of how it looks. After all, we’ll finally have time to do all the things we don’t have time for now: spend time with loved ones, travel, and play golf. What we visualize is the end result of years of hard work, putting a plan in place, and staying true to the plan. As the old saying goes, “If you fail to plan, plan to fail.” Below, we share some tips on how to plan.

Work with a financial advisor. If you consider just one of these planning tips, let it be this one. Advisors understand that no two retirement plans are the same. Creating a financial plan based on your goals allows you to create personal benchmarks rather than use predetermined industry benchmarks. Work with an advisor to shape your investment and retirement goals, determine risk tolerance, and allocate funds. Asset allocation, diversification, and rebalancing are essential to maintaining a healthy portfolio, and working with a financial advisor will help you stay on a strategic plan and focused on your long-term goals.

Open a retirement account. Employer-sponsored plans are a good starting point, plus you can enroll in automatic withdrawals from your paycheck that grow tax deferred. If your employer matches your contributions, we encourage you to take advantage of this opportunity. This is free money. If your employer doesn’t offer a retirement plan or you’d like to save more than the plan’s maximum limits, consider an Individual Retirement Arrangement (IRA).

Create a budget. It’s important to save for retirement with an outcome in mind. Knowing what your expenses are today helps you assess how much you will need in the future.

SAVE! Start today. Not tomorrow. Today. It really is never too late to start. If you’re over 50, take advantage of catch-up contributions. If you’re younger, begin putting money away now, even if it’s only a small amount. Investing a small amount over a long time period can have a greater impact than saving a large amount over a short period of time. Be sure to take advantage of free money by meeting your employer’s retirement match. Don’t leave it on the table. And, remember, each time you earn a raise, increase your contribution percentage.

It’s about time in the market versus timing the market. What do we know about investing? Buy low and sell high. Simple, right? Not really. We can’t stress this enough: It is extremely difficult (read impossible) to predict the best time to enter or exit the market. What ends up happening is, you buy high and sell low. Additionally, in our digitally driven world where news spreads at the speed of light, markets can turn quickly. According to Morningstar, from 2002–2012, if you missed the market’s 10 best days, this left you with a return of -4.64 percent. Those who stayed invested saw a return of 69.96 percent. Don’t let fear drive your investment decisions. Remember, a drop in market value does not equate to a loss in dollars until you sell. That is when the loss is realized.

Don’t believe everything you hear on TV and read on the internet. There have been many headlines over the past few years, both good and bad. It is easy to let the headlines scare you into making rash investment decisions. Investors make mistakes by paying attention to the headlines instead of staying the course. This is what makes having an advisor so important. Remember, by the time the news gets to you—via a friend, colleague, Google, or Yahoo—it’s too late. Your portfolio has been affected.

The best way to ensure that you will be able to retire comfortably is to make a plan and start saving as early as possible.

"You are never too old to set another goal or to dream a new dream." - C.S. Lewis