How do I start planning for my retirement?

I've heard this question from several young people just starting out…. It’s always advantageous to start planning early but not everybody does. If financial security is important to you in your old age, without having a pension plan, it’s necessary to take financial responsibility and start saving some of your income. Learning to spend less than you earn is critical. I realize it’s not easy but starting to save at least a small amount each month can add up over time. This is where working with a financial advisor can be helpful by providing guidance along the way.

   Before investing, budgeting and controlling expenses as well as paying down debts is among the first steps you should take. This shouldn’t be overlooked as part of managing your finances. Getting your financial house in good order by managing debt and using credit cards wisely helps provide the foundation to start your retirement planning.

To get started, set up a savings account for emergency expenses then begin contributing to a Roth IRA account for long term tax-free income at retirement. Many workers these days have 401k accounts with their employers, make sure you have money deducted from your paycheck and allocated to the 401k; frequently employers will match part of your contribution. A side benefit is that you won’t pay federal income tax on the amount you set aside until you withdraw this money at retirement.  If you get bonuses or pay raises consider diverting some of that extra income to an investment account where your investment dollars have the opportunity to grow and only be taxed at capital gains rates instead of ordinary income tax rates which are often higher.

Social Security is another piece of the retirement puzzle that will help provide income towards your retirement  although it’s not sufficient to retire on by itself.  Together with a 401k a Roth IRA, personal investments and the savings that you’ve accumulated over time you’ll be on your way…..   

     This is just a broad overview and each person's situation is uniquely different. There are many more elements that go into planning for your retirement and by working together with a financial advisor a more precise game plan can be tailored to your situation.