Your Money & Business
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Start Planning for Retirement Sooner Rather than Later
November 2024
Photo Credit: Tumisu (Pixabay)
By Jill Valentino
Ten years ago, my mother retired as the number one salesperson of a local Ford dealership. Seventeen years earlier, she had begun her career in her mid-40s after staying home with my brother and me throughout our formative years. Several years into her career, she and my father ended up divorcing. Since it was an amicable split, my mother requested no alimony or child support, even turning down taking half of his 401(k).* Mom was able to support herself, eventually purchasing a new home. After almost 20 years of 55-hour work weeks, she was exhausted and decided to retire at the age of 62. Eligible for Medicare and monthly Social Security benefits, Mom sold her home and moved to Florida, where she has been living comfortably ever since.
In comparison, I have been working full time as a public school teacher for the past 20 years. In eight-and-a-half years, I will become eligible to retire with a pension and benefits (though I plan to stay until reaching the 30-year mark). I also have a 403(b)* that I can access at 59 without penalty, which I have been contributing to for over 10 years. In addition, I will be able to start collecting Social Security and Medicare as well. (See eligibility requirements for Social Security and Medicare at the end of this article.**)
Ten years ago, my mother retired as the number one salesperson of a local Ford dealership. Seventeen years earlier, she had begun her career in her mid-40s after staying home with my brother and me throughout our formative years. Several years into her career, she and my father ended up divorcing. Since it was an amicable split, my mother requested no alimony or child support, even turning down taking half of his 401(k).* Mom was able to support herself, eventually purchasing a new home. After almost 20 years of 55-hour work weeks, she was exhausted and decided to retire at the age of 62. Eligible for Medicare and monthly Social Security benefits, Mom sold her home and moved to Florida, where she has been living comfortably ever since.
In comparison, I have been working full time as a public school teacher for the past 20 years. In eight-and-a-half years, I will become eligible to retire with a pension and benefits (though I plan to stay until reaching the 30-year mark). I also have a 403(b)* that I can access at 59 without penalty, which I have been contributing to for over 10 years. In addition, I will be able to start collecting Social Security and Medicare as well. (See eligibility requirements for Social Security and Medicare at the end of this article.**)
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More on Workforce Retirement Plans
Workforce retirement plans enable employees to save for retirement by contributing to individual accounts. Employers can also contribute to employees' accounts.
*401(k): This is a qualified plan that includes a feature allowing an employee to elect to have the employer contribute a portion of the employee’s wages to an individual account under the plan. *403(b): This is a retirement plan (also called a tax-sheltered annuity or TSA plan) offered by public schools and other employees of government agencies as well as certain 501(c)(3) tax-exempt organizations. Options For those with No Workforce Retirement Plan
There are tax-advantaged options for people without a workplace retirement plan. |
As of today, though, I fear that retirement will not be nearly as financially stable for me as it was for my mother, unless I make some major changes. Though my planned retirement date of June 2034 seems like a long time from now, it will come by fast. And if I’m lucky to live a long life, I need to have a solid plan to maintain a comfortable lifestyle.
Everyone should plan for retirement as early as possible to allow their funds to grow. It’s imperative to be proactive and stay on top of your plan.
Besides growing your workforce retirement plans and other tax-advantaged options, here are some additional tips.
Pay Down Debt
In the book Dave Ramsey’s Complete Guide To Money, Ramsey gives the following advice: “Debt is a product. The best-marketed product in history.” Truer words have never been spoken.
According to a recent MarketWatch Guides study, nearly two-thirds of Americans report living paycheck to paycheck. The same survey reported that women are more likely than men to report struggling between paydays, and a surprisingly high percentage of top earners also say they fall into this category. Living paycheck to paycheck puts you at risk of falling into debt, especially with what we are experiencing today — high inflation and energy prices. And once you are in debt, it is very hard to get out.
If you have high debt balances (particularly debt with high interest rates, like credit cards), it is essential that you work to decrease what you owe before retiring. Retiring with high monthly minimum payments puts you in a risky financial situation, which could lead to having to re-enter the workforce at an advanced age after depleting your savings too quickly.
I am fortunate to have a pension, which will bring in two-thirds of my final three-year average salary when I retire. However, even without any outstanding debts, lifestyle adjustments need to be considered to acquire additional savings.
Keep a “Future Planning” Mindset Despite a High Paycheck in the Present
After working for three to four decades, most workers are collecting larger paychecks, and it is also likely that children have flown from the nest and are living independently. So the urge to indulge in “luxury-type” purchases with an “I deserve it” mindset is easy to fall into. It’s okay to occasionally reward yourself after years of hard work but reeling in spending with a “future planning” mindset, rather than an “instant gratification” mindset, is crucial throughout the final decade of one’s career. Instead of engaging in indulgent, nonessential spending, pay off debt and save as much as possible.
Consider Hiring a Financial Advisor
Even though I am fortunate to have a pension, additional savings is an important component of my retirement planning. My 403(b) uses pre-tax payroll deductions to build up a savings balance, but it is relatively inaccessible (if you withdraw prior to the age of 59, there is a substantial penalty). So, be sure you have other pots to draw from in an emergency.
Since I am older and closer to retirement, my investments are less risky. However, since I don’t have extensive knowledge about how to earmark investments on my own, I decided to hire a financial advisor to do the money management work for me. After the first six years, my 403(b) had only marginal gains and was managed by a faceless financial management company whose only communication was through monthly balance statements. So, I switched over to an independent advisor. I can email him directly, and he sends me weekly account statements as well as a yearly personalized narrative every summer about how my investments fared overall. Having a financial advisor has grown my money more rapidly.
If you consider hiring a financial advisor, choose wisely. Check credentials, types of services offered, and specifics about fees (hourly, flat rate, AUM). Ask for recommendations. Personality and fit counts, too. Make sure you are comfortable with the person who will be handling your money.
Additional Things to Consider
- Explore creative ways to cut spending from your budget line items.
- Make “low risk” investments, if close to retirement, with extra cash (bonuses, raises, overtime, etc.).
- Consider working longer.
- Find part-time or consulting work that is flexible and less stressful after retirement.
- Plan for inflation.
- Focus on physical health — medical bills can get quite expensive as we age!
More Retirement Resources:
Retirement Planning Tools (USA.gov)
Social Security Administration’s 2024 Benefit Guidebook
Dave Ramsey’s Complete Guide to Money
4 Strategies to Pay Off Credit Card Debt Faster (Bank of America)
5 Retirement Fears and How to Conquer Them (AARP)
Retirement Planning Tools (USA.gov)
Social Security Administration’s 2024 Benefit Guidebook
Dave Ramsey’s Complete Guide to Money
4 Strategies to Pay Off Credit Card Debt Faster (Bank of America)
5 Retirement Fears and How to Conquer Them (AARP)
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Jill Valentino is an educator, freelance writer, essayist, tutor, and educational video and teaching materials creator. Her work has been published in Good Housekeeping, Redbook, Country Living, Elle Decor, House Beautiful, Woman's Day, and Hudson Valley Parent magazine. She is a regular contributor for Sanctuary.
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