Planning For Your Future

Saving for Retirement

You shouldn’t go gray thinking
about financing your golden years.

If you’re like most people, you spend so much time working it’s hard to give much thought to the time when you won’t have to. But it’s definitely worth your time now—especially when you consider you’ll need 60% to 90% of your income to maintain your current standard of living in retirement. 

A graph showing the benefits of saving for retirementThis chart illustrates the advantages of starting a retirement savings plan as early as possible. The example assumes an annual income of $40,000 (without increases), 6% contribution, 8-10% rate of return, and monthly compounding. This chart is hypothetical and for illustrative purposes only. It is not intended to represent the performance of any specific investment. Actual returns will vary and principal value will fluctuate. Taxes are due when money is withdrawn.



Beginning to save for retirement as soon as you can and saving as much as you can afford to on a regular basis are two of the best ways to make sure you’re able to live the way you want to in those golden years. In fact, right now wouldn’t be too soon to start the process. Begin by asking yourself:

  • At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you'll need to carry you through it.
  • What kind of lifestyle do you hope to maintain during your retirement years?
  • What rate of growth can you expect from your investments now and during retirement? Be conservative when projecting rates of return.
  • Do you expect to dip into your principal? If so, you may deplete your retirement savings faster than if you just live off investment earnings. Build in a cushion to guard against these risks.

When you figure out your projected needs, don’t forget about inflation. The average annual rate of inflation over the past 20 years has been approximately 2.5%.1 Depending on how far away you are from retirement, that could be a significant number. 

The many advantages of participating in your company’s retirement plan

Saving through your retirement plan is a smart choice because you will be saving money before taxes and it can grow on a tax-deferred basis (meaning that you do not have to pay taxes on your contributions or the earnings accumulating in your retirement plan until you make a withdrawal). Consider this:

  • You’ll be taxed on a smaller gross income, which means a smaller income tax bill
  • You’ll enjoy the convenience of automatic deductions that are regularly deposited in your retirement account by your employer
  • You can take your retirement savings with you when you change jobs
  • If your company offers a match and you’re not taking advantage of it, you’re losing out on free money.

Roth contributions

Some employers offer 401(k) plan participants the opportunity to make Roth 401(k) contributions. If you're lucky enough to work for an employer who offers this option, Roth contributions could play an important role in helping enhance your retirement income.

A Roth 401(k) is simply a traditional 401(k) plan that accepts Roth 401(k) contributions. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there's no up-front tax benefit, but if certain conditions are met, your Roth 401(k) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (403(b) and 457(b) plans can also allow Roth contributions.) 

Things to think about when you enroll.

Step 1: Figure out how much you need to save.
Think about how much you’ll need in retirement factoring in expenses, when you’ll retire and how long your savings needs to last.

Step 2: Create a savings and investment strategy.
Set a target amount you need to save each month, putting towards tax-advantaged employer retirement plans first, then contributing to other accounts.

Step 3: Choose your investments.
Understand your level of comfort with risk to find investments that fit your goals and profile.

Take the next step.

Whether you're ready to enroll in a retirement program or looking to increase your contributions, contact us today.

1Source: Consumer price index (CPI-U) data published by the U.S. Department of Labor, 2013.