Friday , 21 October 2016

Plan For Retirement NOW; Here’s How

The farther away you are from retirement, the greater your potential to fbig_nest_egg_study_istock1achieve a sizable nest egg in the future because time is on your side. [Here’s how to do just that.]

By Motif Investing (

If your retirement is several decades away, a lot of variables could come into play between now and then. You might have to cut your career short if you get sick or you may decide to work longer because it keeps you feeling young.

Life can be full of surprises and like it or not, things don’t always turn out the way we plan. For example, studies show large variances between when older Americans plan to retire versus when they actually do.


The estimated life expectancy in the U.S. is currently 78.88, up from 78.24 in 2010. Since over 80% of U.S. households have less than four years of their annual income saved for retirement, it means a lot of people could run out of money in the last decade their lives. Don’t let this happen to you.

Hope For The Best, But Be Prepared For The Worst

It’s nice to imagine that you’ll need less money in retirement, but many people underestimate the expenses and challenges that can arise. With healthcare costs continuing to increase, you may not be able to live off of 85% or less than what you’re spending in your pre-retirement years.

The earlier you can start saving for retirement, the better your chances are to live a comfortable retirement that is financially secure

Don’t Underestimate Your 401(k) And Company Matching

The current maximum 401(k) contribution set by the IRS is $18,000 for 2015. Keeping the cap static, you could accumulate nearly $1.8 million in 40 years if you max out every year. Plus, you may be eligible for an income tax deduction with a 401(k) plan. A great goal is to start maxing out your 401(k) in your 20s or as soon as you can afford it.

If your employer offers a company match, take advantage of it. Even small amounts can greatly add up over time. For example, let’s say your employer offers a 4 percent match up to $4,000 per year. If your income is $100,000 or greater, that extra $4,000 a year could yield an additional $395,302 in 40 years.


Be Careful Not To Downplay Expenses Either

Perhaps you have a goal to save $1 million by the time you want to retire if you’re single and $3 million if you have dependents. While that may seem like a lot of money, it still may not be enough to pay all of your bills thanks to inflation. It’s up to you to figure out how much you want to have in retirement for creature comforts and essentials, while still having enough for expenses.

Nobody wants to anticipate getting sick, but if your health deteriorates, the costs of long-term care could quickly eat away at your savings. For example, 1 year at a nursing home in San Francisco costs about $146,000 after taxes. That doesn’t even cover the cost of food, medications, doctor’s visits or medical treatments. Build a safety net into your retirement savings goals for peace of mind.

401(k) Alternatives

If you don’t have access to a 401(k) plan, or want to contribute to additional retirement plans, alternatives include tax-advantaged IRAs. They come in two major types: traditional and Roth.

  • Traditional IRAs are tax deferred, meaning you could receive a tax deduction upfront, but responsible for any taxes due on distributions down the road.
  • Roth IRAs are funded with after tax money, thereby making the withdrawals tax-free during eligible years.

The major downside [of an IRA] is the low annual contribution limit. For 2015, the maximum contribution to all of your traditional and Roth accounts cannot exceed $5,500 for those aged 49 and under or $6,500 for people 50 and over. The wealthy also get phased out as seen in the modified adjusted gross income (MAGI) limitations for Roth IRAs outlined below.


Source: IRS

If you have a lot of money in a traditional IRA, consider moving small increments into a Roth IRA. Just be aware that converting a traditional IRA to a Roth IRA can have tax impacts. It’s best to check with a tax advisor to see how a conversion could impact your situation.


Simplified Employee Pension Plans, also known as SEP IRAs, are another retirement plan option. Businesses of any size, including the self-employed, can setup SEP plans.

What’s different about SEPs is the employer gets to decide how much to contribute to participants. Higher payouts can’t be offered to top performers either. The IRS requires all eligible employees to receive the same percentage.

The SEP contribution limits for 2015 are the lesser of 25 percent of an employee’s compensation or $53,000.

Save Beyond Contribution Limits

If you’re able to contribute the maximum limits for your retirement accounts each year, fantastic, but don’t let that stop you from saving even more in after-tax accounts. Retirement plans, such as IRAs, have a 10% early withdrawal penalty before age 59 ½ . As a result, having liquid investments is also important.

Saving for retirement doesn’t have to be focused solely on investing in the stock market. Diversifying into real estate, private equity, and creating a side business are all viable alternatives as well if approached properly.

However you decide to invest, keep investment fees to a minimum. Seemingly small fees can eat away at your retirement savings potential over time. Other tips to help you build your retirement savings include reaping the benefits of fractional shares, using an HSA account, and rebalancing your portfolios regularly.

Get Busy Investing

When it comes to retirement savings, it’s better to end up with too much, than too little. To help manage life’s curve balls, create a realistic plan that incorporates your savings goals, desired lifestyle needs, and a cushion to cover unexpected expenses and emergencies.

[The above article* is presented by the editorial team of (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – register here) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]


(Consider a commission free Horizon Motif, which you can tailor to your individual risk tolerance and retirement time horizon needs. You can also open retirement accounts with Motif Investing. Traditional IRA, Roth IRA and Rollover IRA accounts are available with no fees. To open an IRA, click here to apply now. Motif Investing IRA accounts can provide tax advantaged benefits coupled with the flexibility to trade motifs and single stocks.)

Related Articles from the munKNEE Vault:

  1. 4 factors to determine if you’ll have a large enough nest egg to cover your living expenses during retirement

    As with most financial habits, knowing what you need to do is the easy part. Following through with it is where most people run into trouble. To help you in that regard HERE are the 4 most important factors that help determine whether or not you’ll have a large enough nest egg to cover your living expenses during retirement.

  2. Secure Your Retirement Starting Now – Here’s How

    With people living longer and spending as much as 30 years in retirement, if you want to maintain a moderate standard of living, it is essential to plan your retirement well in advance to secure your golden years. This article outlines 6 ways to do just that. Words: 665

  3. Follow These Simple Assumptions, Rules & Actions To Ensure A Comfortable Retirement

    Most likely whatever retirement planning you have done is wrong. You need to change your assumptions, ask questions and plan for the worst. Below are some very basic concepts that you need to consider when planning for your retirement whether it is in 5 years or 25 years.

    4. Can You Include Physical Gold & Silver In An IRA?

    Q: Can one include gold & silver in an IRA? A: Yes, it is quite easy and I am talking about actual physical gold and silver, not “paper” gold, or certificates, or paper promises. Here’s exactly how to do so.

    5. Americans: Which Gold/Silver Bullion Assets are Permitted in Your IRA?

    Some physical gold, silver, platinum and palladium bullion assets, in addition to traditional paper assets, can be part of your Individual Retirement Account (IRA) or Roth account and they can be bought and sold with no tax consequence until you move money out of the account. [This short article reveals just what bullion assets can, and cannot, be included.]

    6. How much can I spend in retirement without running out of money?

    According to the 4 percent rule, retirees who withdraw 4% of their initial retirement portfolio balance, and then adjust that dollar amount for inflation each year thereafter, can create a paycheck that lasts for 30 years. The concept has recently been criticized given the fact that the current crop of retirees are entering retirement during a period of historically low interest rates so the question of how much a retiree can safely spend each year is now more important than ever. This article reviews the original concept and puts forth a number of variations to help you answer the question put forth in the title: How much can I spend in retirement without running out of money?

    7. How Can You Assure A Successful Retirement? Here’s How

    Planning, preparation and a little luck are key ingredients to any successful baseball player’s career and the same applies to those of us suiting up for retirement.

    8. How to Make a Rich Retirement Your Reality

    Since WWII, we have enjoyed one of the most productive economies the world has ever seen, yet many seniors are broke. When you reach retirement age, you don’t have to be one of them. Below is some straight talk on how to make a rich retirement your reality.

    9. Here’s How To Set Up A Risk Averse Retirement Plan

    One of the most difficult challenges of transitioning to retirement from the working world is a complete change in mindset with regards to an investment portfolio. You go from being a saver to a spender. There’s no future income or nearly as much time to soften the blow from bear markets. Growth is still necessary but you have to be cognizant of the fact that you’ll need to protect some of your assets for spending purposes. Here’s an interesting case study in how to approach this change in mindset.
    Here’s an interesting rule of thumb that most retirees and would-be retirees would do well to adopt.
    Retirement planning is more intimidating for most than any other personal finance topic. We know we should be saving but not how much. We know it’s important to use a tax-deferred account but not which one. Most devastatingly, we often leave saving itself completely up to chance trusting that we will have enough willpower to set money aside for 30-50 years. Luckily, finding a secure and enjoyable retirement need not be mysterious. Here’s exactly what to do.