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How to Create a Retirement Savings Plan

Whether you're 23 and just entering the working world or 55 and dreaming of the day you'll trade in your laptop for flip flops, you need to have a financial plan for retirement.

Even though Americans are living longer, healthier lives – few of us want to work forever. The face of retirement is much different than it was even 20 years ago. For some, retirement means working part time or picking up a new hobby. To others, it means traveling the world and spending time with family. Planning for retirement is different for everyone, but it helps to shift your saving strategy depending on what stage of life you're in. This involves taking a fresh look at retiree expenses and income, as well as withdrawal and estate planning strategies.

Creating a Flexible Plan

Especially for the 20-30 somethings, it's hard to envision what your retirement will consist of. This is why it's important to start saving for retirement early, so you're covered if something unexpected happens along the way. If you're a small business owner, you not only have to plan for your retirement, but about a retirement plan for all of your employees. Setting up a 401K program for your employees shows you're invested in their career and their future.
Based on what phase of saving for retirement you're in, here are a few helpful tips to help you reach your financial goals.

Saving in Your Twenties and Mid-Thirties

  • Get out of debt. While it's possible to pay off student loans or credit card debt and save for retirement simultaneously, high-interest debt can severely impact your finances if not monitored properly. Most federal loans have fairly low interest rates, but that's not the case with most private lenders. Similarly, some credit cards can have an interest rate of up to 20%.
  • Pay yourself first. Several employers offer 401K savings programs. Take advantage of the opportunity and start putting money away for your future. Try to attempt putting at least 10% of your paycheck into a 401K, or if that's not an option for your employer, consider opening and IRA.
  • Invest wisely. Your twenties and early thirties are a great time to take control of your investments and see which option can give your savings the best opportunity to grow. There are endless possibilities when it comes to investing, so it's wise to consult with an expert before investing your life savings. 

Preparing for Retirement in Your Mid-Thirties and Forties

  • Balance between necessities and emergencies. A state of panic can set in during this phase if people think they haven't saved enough for retirement. Tread lightly, though, because saving more than an affordable amount can put you in a financial strain. Maybe revisit your budget to eliminate excess expenses to avoid potential dangers like credit card debt.
  • Take care of your family. During this stage of your life, many adults are trying to save money for their children's education on top of their own retirement, and in some cases even thinking about long-term care for their parents. Also, getting married or divorced at this stage can have an impact on your retirement savings. Continue saving at a higher rate if you can afford to do so in case of a life-changing event. 

Saving for Retirement for the 50- to 65-Year-Olds

  • Stop procrastinating. It's never too early to start saving for retirement, but the longer you wait, the harder it becomes. Consider increasing the amount you add to your retirement nest egg each year to get closer to your goal. While several retirees start a new business in retirement or continue working part time, not having a sufficient amount of retirement savings can impact your lifestyle.
  • Re-assess your portfolio. While you can afford to be more aggressive in the stock market in your twenties and thirties, adults later in life don't have this luxury. However, your portfolio can include a combination of investments with varying level of risks to help maximize on your potential financial growth.
  • Consider lifestyle changes. Depending on how much catching-up you need to do, consider down-sizing your assets, traveling less than planned and weed out some of your nice-to-have amenities.

Key Takeaways

To ensure that your retirement is everything you dreamed of – and more – begin establishing a savings plan as early as possible and consider consulting with a professional. With proper planning, you can make retirement whatever you want it to be. It's especially important to re-assess your retirement saving strategy, assets and portfolio often to maximize on every potential opportunity.
The retirement savings advisors at Cadence can help you understand all of your options and help you make the best decision through each stage of your life.

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