With one of the biggest national sporting events fast approaching, football is top of mind for many. On the flip side, while it may not garner as much attention, your impending retirement will also be here before you know it. As it turns out, your retirement plan shares a few similarities to the Super Bowl. To help you see if you’re on track to win your retirement game plan, we’ve broken it down into four quarters.
Q1 – Your 20s: The clock starts ticking once you get your first job. Much like a football game, you want to start off strong. The best advice is to get into the habit of saving, and an easy way to do so is by signing up for an employee sponsored 401(k) plan (if one is available where you work). Contributions may not be much as you’re starting off, but the idea is to get used to regularly putting savings into an account. During early saving years, the advantages of the time value of money and compound interest serve as a huge benefit.
Coach’s tip: The “points” that you score in the first quarter count a lot more than the points scored in the second, third or fourth. Start scoring early and often.
Q2 – Your 30s: During this time, you’re more established and well into your working years. The main focus is to keep the process rolling, to remain in the lead. Since you’re in the habit of tucking away money, you will start to see the benefits of the early saving that you did in your 20s. This should give you the incentive and momentum to keep up with your plan by significantly increasing the amount.
Coach’s tip: If you didn’t do so hot in the first quarter, you better get going. If you’re in the lead, keep moving and stay consistent.
Q3 – Your 40s: After working for the last 15 to 20 years, it’s time to take a look and see if you’re on pace, or if you need to play catch up. By 40, you should have ample experience saving for retirement, so take time to asses if you’re on track. Increase contributions on your 401(k), aiming to meet, or get as close as possible, to the maximum limit – $18,000. In terms of investments, allocate your portfolio for maximum growth and consider positioning such holdings to be at least 80 percent in stocks.
Coach’s tip: This is your last chance to get back on track, during the second half of the game you’re not giving yourself much time to catch up. Putting away money should be an old hat, don’t miss out on the money.
Q4 – Your 50s: Welcome to your peak earnings years. If you’ve done a good job up to this point, you should have a pretty significant balance in your retirement account(s). Maximize your annual contributions and do some saving outside of the retirement plan. When you turn 50, the IRS allows you to put an extra $6,000 a year into your retirement account, which can serve as a last big effort to sock away as much money as possible.
Coach’s tip: The game is coming to an end… give it your last big push and make up for lost ground if you’re behind.
2 minute warning – Your early 60s: Take a look at your balance and see how much money you’ve saved for retirement. Have you saved enough? If yes, at the two minute warning you’re kneeling on the ball and running out the clock. Work is an option for you, and you’re ready to retire, volunteer your time, travel and spend time with your family. If the game is close or tied and you haven’t saved enough money, you’ll likely need to extend the amount of time that you’ll have to work.
Coach’s tip: The clock runs out when you retire, and by this time you will hopefully have enough to survive until the rest of your life.