Wouldn’t it be lovely to see the world after retirement or spend your days relaxing on a beach with your loved ones?
Unfortunately, the funds to make your retirement dreams come true won’t magically appear in your bank account. It’s up to you to take steps to build wealth now to set your family up for later.
Whatever your vision is for life after retirement, putting a retirement plan in place can help you work towards your retirement goals. As a new family, your first step is to make a plan for your day-to-day money management. Once you have that, you’re ready to start planning for the future.
Discuss Your Financial Future
It may make sense to pay off your high interest debt first so that you’ll have more to put toward investments later.
Before you make a plan, you’ll want to figure out what you’re planning for. Sit with your partner and figure out what financial events are on the horizon. Also, use this as an opportunity to get on the same page regarding expectations.
You can even break these events down into needs and wants to help you prioritize spending and focus on your goals.
Priorities will likely shift through the years, but a few simple questions can help you decide what to focus on with your finances:
- Do either of you have debt?
- Do you have any major life events planned (wedding, starting a family, funding an education, buying a home, etc.)?
- What are your career goals?
- What age do you each hope to retire?
Based on your discussion, you can decide how to prioritize things like paying down debt and saving for life events while still saving for retirement. For example, it may make sense to pay off your high interest debt first so that you’ll have more to put toward investments later. And college savings plans can help address the educational needs of children without sacrificing your own retirement planning.
Start Saving for Retirement Now
If you begin saving $2,000 a year at age 25, you'll have around $560,000 by the time you’re 65 (assuming earnings grow at 8% annually).*
With everyday expenses, it may seem like you have no money to spare. Resist the temptation to hold off on retirement saving until later. Even small contributions now will make such a big difference in the future!
For example, if you begin saving $2,000 a year at age 25, you'll have around $560,000 by the time you’re 65 (assuming earnings grow at 8% annually)*. If you wait ten years until you’re 35 and save the same amount per year with the same annual earnings growth, you would end up with about $245,000.
In that example, waiting ten years to begin saving leaves you with less than half the money you could have! That’s why it’s important to get started now.
You may have heard the phrase “pay yourself first.” You can streamline your savings plan by setting up automatic monthly deductions into a retirement account, such as a 401(k), 403(b) or IRA.
And if your employer offers any contribution match programs, take advantage. That’s free money!
Have Emergency Savings Ready
One car accident, a loss of employment or a sudden hospital trip can put a major dent in your finances if you don’t have savings to cover your needs.
It’s important to plan for the unexpected. Otherwise you run the risk of dipping into retirement savings when an emergency comes up.
Start by estimating costs for critical expenses. Most experts recommend you have enough money in your emergency fund to cover 3 - 6 months of living expenses. Put this aside into a separate savings account.
With an emergency fund in place, your retirement savings can be left alone to grow over time. One car accident, a loss of employment or a sudden hospital trip can put a major dent in your finances if you don’t have savings to cover your needs. So set up an emergency savings account and leave your retirement accounts to flourish!
Remember, you’re not alone. A financial professional can help you and your family get and stay on track toward a healthy financial future.
When you’re ready to build some wealth for your family, Suncoast Trust & Investment Services can help!
* This material is for illustrative purposes only and not intended to depict or predict the performance of any specific investment. This example does not reflect the impact of taxes, transaction costs or other fees generally associated with investing.