You may have just started working but there's no better time to think about setting up a retirement fund than right now. This is a great time to take advantage of the power of compounding. Starting to save today is the easiest way to ensure a comfortable retirement in the future.
Develop a discipline for saving and stick to it
Retirement is a long way off, and it’s easy to spend your money on more immediate needs like rent, student loans, or a new car. But developing the discipline now to save for your retirement is one of the best things you can do for yourself. Don’t just save whatever money you have left over each month; instead, consider a plan to save a percentage of your monthly salary to invest in your future. Saving smaller amounts throughout working years lets you avoid having to play catch-up later.
Use the power of compounding
Time is on your side. The sooner you start to save for retirement, the greater your opportunity to take advantage of the power of compounding.
Take advantage of retirement savings vehicles available to you
Many employers offer retirement plans, such as 401(k)s and 403(b)s. With these plans, employers often match employee contributions up to a certain percentage of the employee's annual salary. By not participating in your employer’s plan, you forgo its contribution and can't take advantage of saving pretax dollars.
Hopefully you’ve already begun a program for your retirement fund. If you haven’t, it’s not too late to start. You’re still young enough to take advantage of the power of compounding and move forward with your retirement plan.
Use the power of compounding
You still have many years left until retirement. Use those years to grow your retirement funds with the power of compounding interest.
With so many bills to pay and so many conflicting priorities, it’s easy to put off saving for retirement, especially if you’ve already started to build your nest egg. But the years go by fast and there will always be other bills to pay. Don’t let your plan be sidetracked. It’s important to continue (or to start if you haven’t already) to set aside a percentage of your salary each month to save for your future.
Understand your investment goals and asset allocation plan
Your investment goals will change throughout your life. Your retirement is still far away, and a key goal for your investments should be growth consistent with your risk tolerance. Your asset allocation plan should reflect that goal. As you grow older and closer to retirement, your goal will shift toward lower-risk, income-producing assets and your asset allocation plan will shift accordingly. No matter what your current investment goal is, it’s always important to diversify your assets in order to manage investment risk.
The reality of retirement is almost upon you. It’s time to do some concrete planning. You’ve done your best to save for retirement. Now it’s time to see where you are and to catch up if you need to.
Assess your current financial position for retirement readiness
Before you retire, it’s important to understand your financial needs in retirement and whether you have the savings and income necessary to meet those needs. Taking the time now to understand your financial situation will help you enter retirement with a clear financial plan. To see where you stand, use our retirement calculators.
Fill in the gaps
If you find that your current savings may not be enough to meet your needs in retirement, there are still things you can do to better prepare:
- Increase retirement savings as much as possible and take full advantage of retirement plan and IRA catch-up rules.
- If you’re not already maximizing your contributions to your employer-sponsored retirement plan, now is the time to do so.
- Consider contributing to an IRA in addition to your employer-sponsored plan.
- If you’re over age 50, you can take advantage of the "catch-up" provisions for your IRA and employer-sponsored retirement plan.
Develop a plan to eliminate all debt prior to retirement
Managing expenses during retirement is key to a successful retirement plan. A great way to minimize expenses during retirement is to eliminate your debt before you retire.
Work longer and delay Social Security
Many people are deciding to delay retirement for a few years or to continue working part time during their retirement. Each of these strategies may allow you to delay withdrawals from your retirement savings and defer Social Security payments – resulting in larger payments later in life.
Review your investment strategies
No matter where you stand relative to your retirement savings, as you prepare to retire, your investment strategy is more important than ever. You’ll want your assets to be there for you in retirement, but you also want to see your savings continue to grow. We have experts who can help you think through this important concern.
Now that you are in retirement, it doesn’t mean that your finances are on auto-pilot. You may want to review your retirement plan from time to time so that you properly meet your expectations.
Assess your current financial position
Make a detailed projection of retirement income and expenses to ensure that you have the financial resources you need to enjoy the retirement you’ve earned. It is important to develop a budget and stick to it so you can have a lifestyle you can afford.
Plan for your money to last
Many retirees have income from a variety of sources, including:
• Employer-sponsored defined contribution plans (such as 401(k)s)
• Employer-sponsored defined benefit plans (pension plans)
• Social Security payments
• Withdrawals from Traditional or Roth IRAs or annuities
• Earnings from part-time jobs
• Other savings
It is important to develop a reliable income stream that provides you with the income you need (without depleting your assets too quickly), takes advantage of available tax benefits and complies with regulatory requirements.
Review and adjust your investment strategy
Once you are in retirement, it’s important to assess your investment portfolio and retirement plan annually. Is your portfolio structured in a manner that is consistent with your objectives and risk tolerance?
Our experienced Retirement Specialists can help you monitor your plan and portfolio.
Understanding Social Security and Medicare
Social Security and Medicare are key benefits in retirement, and it is important to understand your options before taking advantage of these benefits. To learn about Social Security and Medicare benefits, visit the Social Security website.
When it comes to your goals for retirement, there is no such thing as “one size fits all." That’s why at Eastern Bank, we offer a full range of individual retirement accounts (IRAs) to meet your specific needs. Whether it is a Traditional, Roth, Rollover or SEP IRA, we have your investment options covered.
To learn more about our retirement products, please visit our retirement center