How To Get Back On Path With Your Retirement Plan

Planning For Retirement

The first step is seeing where you stand financially. Fidelity found that 82% of Americans they surveyed saw their retirement plan impacted by the pandemic and related events.

If you’re worried about how the pandemic has affected your retirement plan, now is a wonderful time to review it.

Time to Revisit and Review Your Retirement Plan

First, let’s discuss what a retirement plan can do for you and your family. Think of your retirement plan as a guideline for your goals and timeline.

While you want to be as clear as you can on the goals, your plan isn’t set in stone. Life happens - as we all learned last year - so flexibility is key.

For us, we review our accounts and progress about twice a year and make adjustments as needed.

Ballpark How Much You Need for Retirement

Let’s say this your first time setting up a plan. Where should you start? Here are three areas to go over and discuss:

1. Monthly Costs
I suggest you begin by defining what you’d like your retirement to look like. What does your day-to-day look like? Where do you want to live? Are you in a house, apartment, or full-time traveling?

2. Healthcare
This can be a big unknown, so the focus here is looking at your current health expenses and perhaps talk with family members to see if there are any familial health issues you may need to be proactive about.

3. Quality of Life
Besides the necessities, what other expenses do you need to take into consideration? Will you be traveling for part of the year? Will you be RVing around the country?

If you’ve decided you want to offer financial assistance to your kids, what does that look like? How much do you want to be set aside for college expenses or other milestones?

Are these going to exactly capture your retirement costs? No. However, this back of the napkin estimate can give you a better idea of how much you need to have saved and invested for when you retire.

You can then work backward and figure out how much you need to save each month to hit that goal.

You can also talk with a financial advisor to do a deep dive with the numbers and give some ways to optimize your finances now.

Even if there is a significant gap between what you can do now and what you need to save, just start. You can get that momentum going and from there you can find ways to build that up.

Optimize Your Accounts

The main retirement accounts that people have access to are those offered at their job. Depending on where you work, your employer may offer a 401(k), 403(b), or a TSP.

With these three accounts, you can contribute money pre-tax and invest it. Some employers even encourage you to save by offering matching contributions.

It may not be much now, but as you continue, your contributions will grow thanks to the power of compound interest.

Another type of account you can save and invest in is an IRA. The difference between a traditional IRA and a Roth IRA is when you are taxed.

With a traditional IRa, your contributions are tax-free, but your withdrawals are taxed. The Roth is the opposite - your contributions are taxed, but your withdrawals are not.

Sitting down with a financial advisor can help you decide which account is better for you.

Healthcare costs are a huge unknown so saving up can be a smart move.

Health Savings Accounts (HSAs) can allow you to save for future healthcare costs while also offering substantial tax benefits.

Your contributions are pre-taxed. Your money grows tax-free and you can withdraw for health expenses tax-free as well. A triple win!

Considering the Fidelity study mentioned earlier, a couple retiring at 65, the actual average cost throughout their retirement would be around $295,000!

Definitely a significant amount, but if you start early, it’s easier to build that up. If you have a high deductible plan, take advantage of it by opening and contributing towards your HSA.

Follow Through on Your Plan

After you’ve reviewed and adjusted your plan, it’s now time for the hard part - executing it. One of the best moves we’ve done is by automating our contributions and transfers as much as possible.

Last year was volatile and there were days we caught the news and began to second-guess our plan. Thankfully by reminding ourselves of our long-term plans, we continued to invest.

Gaining a Guide

If you’re looking to review your retirement plan and would like advice from a financial advisor, please check out Coastal’s Wealth management team, available through CFS¹

They’re dedicated to helping your craft a plan that fits your family and goals!

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