• How Much Should You Save By Age 30, 40, 50, or 60?

    What number should you strive to reach?

     

    Provided by MidAmerica Financial Resources

     

    It is agreed that the earlier you start saving for retirement, the better. The big question on the minds of many savers, however, is: “How am I doing?” This article will show you some rough milestones to try and reach. (Keep in mind that you may need to save more or less than these amounts based on your objectives and lifestyle and income needs.)

     

    At age 30, can you have the equivalent of a year’s salary saved? Some 30-year-olds have the equivalent of a year’s salary in debt, it is true; the thing is, you can probably manage debt and save and invest to build wealth simultaneously. One way to plan to reach this goal is to save (and invest) about a fifth of your after-tax income beginning at age 25. That assumes you start at 25 with no savings; if you start saving and investing earlier, the goal may be easier to attain.1

     

    At age 40, will your savings be triple that of your yearly earnings? The average American currently saves about 3.5% of his or her income. Can you save 3.5% of what you earn at 25 or 30 and build a six-figure retirement fund by your 40th birthday? Perhaps, if you are an absolute investing wizard or start your career with a salary north of $100,000. Otherwise, saving and investing 10-15% of what you earn annually will be crucial in planning to reach this goal.1,2

     

    When you are 50, will your savings be about six times your salary? Slow and steady saving and investing could get you there, but building up $250,000 or more in retirement money can be a challenge given factors like child-rearing, divorce, periodic unemployment, or health concerns. One response is to adjust your discretionary spending habits, if life allows.1

     

    At 60, will your savings equal eight or nine times what you earn annually? Amassing $500,000 or more in retirement assets should be a priority. Even if you have not managed this, other resources can help you generate retirement income in the years ahead: you will have Social Security benefits coming your way and possibly home equity or executive compensation or business proceeds to make your financial future more promising.1

     

    Saving and investing 10-15% of your annual pay merits serious consideration. Through recurring contributions to tax-deferred retirement savings accounts, you can make saving and investing a regular process. Your future self may thank you.

                  

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com www.mid-america.us

     

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

    Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
    MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

        

    Citations.

    1 - cheatsheet.com/money-career/how-much-money-should-have-based-on-age.html/ [9/20/17]

    2 - businessinsider.com/how-much-you-should-have-saved-every-age-2017-9 [9/18/17]

     

  • Retiring Before 60

    If that is your dream, explore whether these steps could be useful to take.

     

    Provided by MidAmerica Financial Resources

     

    How could you retire in your fifties by choice? You will need abundant retirement savings and ways to access your retirement assets that lessen or avoid early withdrawal penalties. You may also need to have other, sometimes overlooked, components of retirement planning in place. 

     

    There are ways to tap retirement savings accounts before 60. True, the I.R.S. discourages this with 10% penalties on traditional IRA withdrawals prior to age 59½ and withdrawals from many employee retirement plans before age 55½ – but those penalties may be skirted.1

     

    An IRA or workplace retirement account funded with pre-tax dollars can be converted to a Roth IRA funded with post-tax dollars. While the conversion is a taxable event, it allows a pre-retiree more potential to retrieve retirement savings early. Before age 59½, you are permitted to make tax-free, penalty-free withdrawals of the amount you have contributed to a Roth IRA (as opposed to the Roth IRA’s earnings). After age 59½, you can withdraw contributions and earnings tax free provided you have owned the Roth IRA for five years. For Roth IRA conversions, the 5-year period begins on January 1 of the year in which the conversion happens. Roth conversions may be a good move for some, but a bad move for those who live in high-tax states with plans to retire to a state with lower income taxes.1,2

     

    Under I.R.S. Rule 72(t), you have the option of taking “substantially equal periodic payments” (SEPPs) for five years from an IRA in your fifties. The schedule of payments must end after five years or when you turn 59½, whichever is later. Such withdrawals are taxed as ordinary income, and the distribution schedule cannot be altered once distributions have begun.1

     

    A life insurance policy could assist you. For most pre-retirees, buying life insurance comes down to the pursuit of the largest death benefit for the lowest cost. If you have enough net worth to potentially retire before 60, you may have additional objectives. A sizable death benefit could help your heirs pay estate taxes. A whole life policy might provide a consistent return akin to a fixed-income investment in retirement, but without the usual interest rate risk.3

      

    An HSA might help with upcoming health care expenses. If you retire prior to 60, you must acknowledge that you could live another 35-40 years. Fidelity believes that a retiring 65-year-old couple will need $275,000 for future health care costs. It bases its forecast on Social Security life expectancy projections, which have the average 65-year-old retiree living to about age 85. If your retirement turns out to be twice that long, you could need to set aside much more.4,5 

          

    A Health Savings Account offers a potential triple tax advantage. Your contributions are exempt from tax, the money saved or invested within the account benefits from tax-free growth, and withdrawals are untaxed if the money pays for health care costs. This is why many people are looking at the combination of HSA-plus-HDHCP (that last acronym stands for high-deductible health care plan).6

     

    Retiring in your fifties may present you with greater financial challenges than if you retire later. While you may retire in better health, you will have to wait to collect Social Security and Medicare coverage. If early retirement is on your mind, consult a financial professional to see if your savings, your potential income streams, your insurance situation, and your ability to work part time correspond to your objective. 

     

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com www.mid-america.us

     

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

       

    Citations.

    1 - cnbc.com/2017/07/05/three-retirement-savings-strategies-to-use-if-you-plan-to-retire-early.html [7/5/17]

    2 - bankrate.com/investing/ira/roth-ira-5-year-rule-the-tax-free-earnings-clock-starts-ticking-at-different-times/ [3/25/16]

    3 - forbes.com/sites/jamiehopkins/2017/04/27/why-life-insurance-is-essential-for-retirement-planning/ [4/27/17]

    4 - fidelity.com/about-fidelity/employer-services/health-care-costs-for-retirees-rise [8/24/17]

    5 - ssa.gov/planners/lifeexpectancy.html [9/14/17]

    6 - cbsnews.com/news/how-to-cope-with-health-care-costs-in-retirement/ [9/12/17]