While the market continues to be very volatile, it is easy to become paralyzed by inaction.  It is important to stick with you plan to achieve long term goals.  Will you be ready for retirement when the time comes?  Today we will explore some steps you might take at various stages of life to help ensure that you can retire when you’d like to.

When you are in your twenties and early thirties, starting your career and family, one important step of preparing for retirement is simply to start saving.  One of the most simple and convenient ways to save retirement dollars is to use your employer plan, if you have one.  Your contributions may be deducted from your paycheck, and they may be matched by your employer.  Try to capture the full amount that your employer will match, because if you don’t you are leaving money on the table.  Develop a plan to allocate your assets, but you can generally be more aggressive when you are decades away from retirement.  As you start out on your own, it is also important to start your emergency fund, and keep adding to it.

As you progress from your thirties and into your forties, it’s important to continue your retirement savings even as other obligations make it harder to prioritize retirement.  It’s also important to make sure that you have adequate life and disability insurance to meet your obligations if you can’t.  Your emergency fund should grow to three to six months of living expenses.  As your account balances swell, it might be tempting to invest either too conservatively or too aggressively.  Stick with your asset allocation plan and focus on your long-term goals.  When you change jobs, it might be tempting to tap into some of your accumulated retirement savings.  Instead, consider rolling the balance over into an individual retirement account (IRA) or into your new employer’s plan. 

By the time you reach your fifties and sixties, you are in the home stretch toward retirement.  If possible, consider boosting your savings to 20 percent.  Catch-up provisions may make it possible to contribute more to your IRA and employer retirement plan.  Reassess your asset allocation plan and consider increasing the share of the account balances in lower-volatility investments.  At this stage it is important to start considering what you want your retirement lifestyle to look like.  Where will you live?  How much income will you need each month? Make a realistic inventory of your retirement resources such as social security, pension payments and personal savings.  Work on a plan to pay off any remaining debt. 

Just before you retire, consider how much you can realistically withdraw from your retirement accounts each year.  Determine the order in which you want to access accounts and discuss this with your tax advisor to ensure you are withdrawing in a tax-efficient manner.  At age 72 you may be required to take distributions from your retirement accounts.  Incorporate that into your spending plan.  At this time you may also reconsider your asset allocation plan.  You may still want to hold some growth investments to help dampen the effects of inflation.  Keep one to two years’ worth of living expenses in very low volatility vehicles like money market accounts, savings accounts or certificates of deposit (CDs).  This may help to address the potential for volatility in your other investments. As you make your other financial preparations for retirement, it might be a good idea to review the beneficiaries on your accounts and insurance policies and review the other aspects of your estate plan.

A little preparation throughout your working life can help to make sure you are ready for retirement when the time comes.

For more information, you can listen to the podcast of Smart Money Management radio show on this topic, along with others, at www.alderferbergen.com.

Asset allocation does not ensure a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

 Alderfer Bergen & Co. and LPL Financial do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

CDs are FDIC insured to specific limits and offer a fixed rate of return if held to maturity.

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