There’s been a lot of talk in recent months about the chances of a recession in the near future. While it’s hard to know exactly if or when such a downturn will occur, you may be thinking about how it might impact you. If you are over the age of 45, a recession can be particularly worrisome. The fears regarding what it could do to your retirement saving or nest egg are legitimate. So too is the fear of another common side-effect of a recession–job loss. Losing a job in your late forties or fifties is much different than losing a job in your twenties or thirties. First off, it can be very difficult to find a job and get hired as you grow older. There’s also the fact that you probably won’t be able to find a job that pays what you used to be paid, which you have probably earned through years of hard work and loyalty. However, even though recession may be far off, that doesn’t mean you can’t prepare for one. There are a number of things you can do to prepare yourself should the unthinkable happen. First off, practice searching for jobs. Not only will this allow you to dust off your resume and learn about the job search resources out there, but you may even come across a job that’s actually worth pursuing. Along with practicing your job search, you will also want to take a look at your professional network. Keep in mind that many people today get jobs through referrals or knowing someone who can get their resume to the right person. Now is a good time to maybe get back in touch with some people and at least start put some feelers out for new employment opportunities or, at the very least, starting conversations with people that you haven’t talked to in a while. You may also want to take the time now to get your resume into shape. If you need to hire a career coach or resume writer to do so, then do so. Finally, regardless of what happens in the future, just remember that a recession-related layoff or job loss is not your fault. It does not make you a failure as it can happen to anybody anytime. If you do lose your job, keep your head up and get searching for the next opportunities.
Not everyone retires at 65. Some may work longer, while others may retire well before that age. While financial experts often try to make early retirement the goal, that doesn’t mean it’s right for everyone and it overlooks the advantages that a longer career can have. The obvious plus to a long career is that it provides more time to stash away money for retirement. As you may well know, your nest egg can get quite large if you are able to add to it over decades. For example, if you start saving for retirement at 25 and work until your 65, that’s four decades worth of saving. That’s a lot of money! Furthermore, the longer you wait to tap into your retirement savings, the more time that your retirement money has to compound and grow, especially if you have it invested in the markets. There’s also the fact that you can take advantage of the still working exception, if your retirement plan offers it. By doing so, you can avoid drawing down on your nest egg and save it until you actually retire. Along with the financial advantages of a long career, there’s also the physical advantage that a long–or longer–career can provide. While some jobs will grind the body down over time, many jobs provide a form of mental and physical activity that can be stimulating and engaging, which keeps us mentally sharp. As I’ve written about before in this blog, it’s not unheard of for retirees to struggle when they retire because they suddenly don’t have something to do everyday to stay active and social. As a result, many retirees suffer from depression, which can also have a significant impact on one’s physical well-being. All this, however, is not to say that those who retire early–or at 65–can’t be stimulated or engaged in retirement. I’m just focusing on the advantages of a longer career. If you plan on working well into your 60s, or even your 70s, you will want to plan for it–and yes, it will require some detailed financial plans–you will want to talk with a certified financial planner.
Over the course of a career, you will probably have multiple retirement accounts. You’ll probably open a 401(k) plan with each employer along with a personal IRA. It can be easy to lose track of those accounts over a career that lasts decades, especially for early-career jobs that may not last that long. While it is suggested that you be diligent with tracking your retirement accounts after you leave a job, it’s not uncommon for accounts to be forgotten about. If you do lose track of your retirement accounts, there are tools available to try to track them down. The Department of Labor’s Employee Benefit Security Administration can provide help over the phone as well as online (they have a searchable database of abandoned plans). Depending on the state you worked in, you may also want to see if that state has an unclaimed property division with a database similar to the federal government’s. Finally–as a last resort–you may want to reach out to your past employer where you set up your forgotten plan and see if they may have information regarding the custodian of your forgotten account. If you can reach the custodian, you should be able to get an idea regarding the location of the account. As stated earlier in this post, the best way to avoid all this is to keep track of your retirement accounts from the start. If you leave a job, be sure to either rollover your employer plan money into an IRA or you find a way to not forget the plan if you decide to keep it (this is a common option if you have worked for an employer for a long period and have a substantial amount saved in your employer plan). So, do you have any forgotten retirement accounts?
There is no set time when people have to retire by. Thus, some people choose to retire in their late 50s, while others may work well into their 70s. Unless you are forced to retire–either because of health reasons or are forced out–then you most likely have options regarding when you can retire. If you find that you have such options, then it’s important that you explore them and understand the advantages to retiring at certain points in your life as compared to others. For example, the decision to retire at 60 will carry with it different consequences that deciding to retire at, say, 65 or 67. The biggest thing will those extra years of living off your nest egg. You may also want to consider whether your retirement date is the date is your retirement date or your “retirement date.” By that, I mean, do you intend to stop working altogether when you retire or will you work part time or turn a hobby/passion into a second career. Given the costs of retirement these days–as well as many retirees’ desire to stay active–it’s not uncommon for people to continue working part time into their 60s or 70s. They may retire from their career and begin collecting on a pension or start tapping into their nest egg all the while pursuing a second career or working part time. If you do decide you want to keep working, but do so on a limited/part-time basis, you will need to think about how that will affect your finances as well as how it may affect your retirement saving/planning in the years leading up to that transition. If you decide that you want to stop working completely when you retire, then you will also need to think about finances, especially whether you will have enough saved or whether you may need to work to a certain age to save enough. It is strongly suggested that you discuss your retirement date with a certified financial planner so that they can provide input regarding how your finances will be affected and what the best option is for you. So, what’s your retirement date?
It’s not uncommon for retirees to have more than one retirement account. Usually it’s a result of having worked at multiple employers throughout the course of a career and having opened a retirement account at each place of employment. If you do have more than one retirement account, don’t worry as there’s nothing wrong with that. You may want to consider consolidating similar accounts as you near or enter retirement, but that’s a discussion for another post. If you do have multiple accounts–especially more than one Roth-type account–you may want to make sure that you are maximizing your contributions to those accounts. And yes, if you have more than one account, such as Roth IRA and Roth 401(k), you can make max contributions to both at the same time. That includes any catch-up contributions if you are over the age of 50, which could total up to tens of thousands of dollars when combined with regular (not catch-up) contribution amounts. The same goes for if you have multiple Roth IRA accounts, although, you may want to consider consolidating them at some point for efficiency’s sake. Most retirement accounts allow you to maximize contributions regardless of whether you have multiple accounts or not. However, if you do have more than one retirement account and you want to make max contributions, your best best is to speak with a certified financial planner to make sure there are not issues with that.
Your retirement goals and plans are important, but you will never reach them unless you have a career with which to fund such pursuits. Having a stable and lucrative career is fundamental to the retirement saving game. If you don’t earn enough then you are going to have an awfully hard time saving for life after you stop working. Thus, it’s wise to make focusing on your career a part of your financial and retirement savings plans. This means making sure that you stay relevant both in your field and at your place of employment. You can do so by staying on top of the latest trends and best practices as well as keeping an eye on the industry in which you work. Who is doing what? How is your company performing relative to others in the field? Are your skills up-to-date? If you work for a large corporation, you should keep track of what the company is doing and how they operate. Is management consistent in its decision-making? Are there particular hiring and promotion trends you’ve noticed? How is the company discussed in the media? Answers to questions like these can give you a sense as to whether you may need or want to consider making a move to another company or another industry. Such a move can pay dividends as you may end up in a better paying position or at a company that is trending upwards with more opportunities for professional growth. A mid-career move can also be a personally and professionally revitalizing moment that can help to rejuvenate your career and allow you to refocus your goals. It can be easy to set your career on cruise control, especially after a few decades in a particular field, but that can be setting yourself up for heartbreak and pain. For example, you may overlook a looming layoff or may not see the signs that your employer is in a downward spiral. Remember, your earned income is what drives your retirement savings and financial plans, so it’s vital that you maintain it (as well as take advantage of opportunities to increase it) as best you can.
If you’re within a few years of your intended retirement date, you’re probably starting to convince yourself that you are ready for it. You probably talk to friends and family about how long you’ve worked or how you’ve saved enough–or just about enough–to no longer need a paycheck or how you’ve started looking forward to the day you retire. If you aren’t near retirement, perhaps you’ve heard an older family member or co-worker talk like that. While it’s true that one may be financially or professionally ready to retire, that does not mean that one is necessarily physically or mentally ready to retire. It’s not unheard of to find retirees going back into the workforce after a few months or years in retirement. Sometimes that may be for financial reasons, but it can also be out of boredom with retirement. Yes, people get bored with retirement. After all, there are only so many rounds of golf that can be played or so many hours that can be spent in the garden or so many trips to be had (just to name some common retirement activities). This is especially true for younger retirees who tend to be more active and healthy than older retirees. It’s also not uncommon for people to not realize that retirement boredom is a possibility until they actually retire. While there is nothing wrong with this, it does mean that they may have tapped into their nest egg and used money that they could have instead kept saved if they had planned better. This is why it’s important that you really make sure that you are ready for retirement. This means doing some self reflection and thinking about your plans for retirement. Is there a possibility you may get bored with retirement? Do you have definite plans regarding your retirement? Do you want to keep working, but if a different field or with more flexible hours? Are you unsure of what you really want to do with your retirement? Such questions and reflection can help guide you to make the choice regarding retirement that is right for you. Who knows, you may find that you really aren’t ready to retire and that you just need a change of scenery career-wise. On the flip side, you may realize that you really do have plans for retirement that don’t involve working and that retirement is the right move for you. Whatever you decide, just make the decision that you feel is best for your life.
While you may have plans to retire at a particular age, life and your career may dictate otherwise. Certain scenarios may arise that may force you to think long and hard about retiring sooner than anticipated. A major company restructuring or other organizational changes may make retirement seem more appetizing than continuing working. Furthermore, general discontent with your career can be another driver of the decision to retire earlier than intended. If you’ve been consistent with your retirement saving and focused on saving as much as possible, you may be okay, especially if you are within a year or two of your intended retirement age. However, if you find that you’re considering retiring more than a few years earlier than intended, you may have some struggles ahead of you and you may need to think about ways to potentially alleviate those issues. If you are in a situation where you think that you may run into a scenario where you may retire sooner than you’d like–for example, your company has a policy or reputation of forcing people out at a particular age–you will want to start saving for that possibility sooner rather than later. That means taking advantage of catch-up contributions as soon as you turn 50 as well as employer matching benefits. You will also want to make sure that you max out contributions too. Finally, whether you are looking to save more in anticipation of a possible early retirement or are on the cusp of making such a decision, you should speak with a certified financial planner.
The traditional view of retirement is that of someone in their 60s (or 70s) leaving his/her job for good. They ride off into the sunset as retirees where they spend their time with laughing and enjoying time with family and friends. In this day and age, that picturesque retirement is no more. Only about a third of American workers are currently retiring the traditional way–and staying retired. Instead, it’s becoming quite common for Americans to retire and eventually make their way back into the workforce. There may be various reasons for the return; for some it’s to overcome boredom while others may need the income a job provides. What does this mean for you? Well, for starters, you may want to take the time now, before you retire, to really visualize what retirement will be like and to define what it means to you. Do you see yourself becoming bored without the challenges a job may bring about? Do you foresee financial issues that may require you to continue working? Is your job an important part of your social life? Taking time to decide whether a traditional retirement is right for you is an important step. If you don’t see yourself enjoying that form of retirement, then what do you picture your retirement to be? You may want to start angling yourself towards that. If there is a particular place you want to live, then consider starting to make plans for getting there. If you want to keep working, make sure that is clear with your employer. There’s nothing wrong with taking a non-traditional approach to retirement so long as it’s thoughtfully done. If you need help with planning for a non-traditional retirement and making sure that your finances are in shape for that, you should speak with a certified financial planner. With that, will you lead a traditional retirement?
Throughout your career, your yearly income will rise from time to time as you get promoted or move to new jobs as your career advances. Chances are that money will be put to use paying for many of the expenses that come along with being an adult or having a family (i.e. a mortgage, car payments, college tuition, etc.). But what about if you have some of that income left over? Aside from saving it, you should also consider putting some of it towards your retirement savings. Remember, bumps in income present a great opportunity to increase retirement fund contributions and help you to build up your retirement savings. Also, just as a tip for if/when you get an income bump, that doesn’t always mean your lifestyle spending has to increase as well. If you can maintain your lifestyle while your income increases, then that will free up more of that income for savings and–dare I say it–a little fun (i.e. a vacation). In summary, take advantage of raises and income bumps and put some of that money towards your retirement savings. If you have questions about how much you should be saving for retirement or creating a plan for that extra income, you should talk with a certified financial planner.