Reaching Your Retirement Goals
By Timothy F. Terry, Founder, Terry Lockridge & Dunn / World Trend Financial, Linn County LIVING WELL Magazine
We rarely hear: “I realize it is a little early to be planning for my retirement…”
Planning usually starts a few years before the big day. It should actually get under way many years earlier. In fact, your first day of work is the best time to begin.
There are three stages of retirement: planning, accumulation and enjoyment.
Ideally, early employment years are for planning. It is time to decide if you will be a saver or spender. Decisions you make at this point will set the stage for your future. If you decide to spend everything, you eliminate the opportunity to save. Commit to a large mortgage or car payment and saving for the future becomes difficult or impossible.
Next is the real work: the accumulation phase. This is where you get down to business and commit a serious percentage of your income to your future nest egg. Smart investors understand accumulation and time are essential elements in any financial plan. A 25 year old who puts away $1,000 at 5% will have $7,000 at age 65. Do this annually and your account will grow to $121,000.
I like to remind my reluctant 25-year-old savers, a $5,000 annual Roth IRA contribution will provide them with a $600,000 tax-free savings account at age 65.
The smart investor also realizes increasing the rate of return will greatly enhance their future security. In the $5,000 annual Roth example, raising your return to 7% will increase your account to nearly $1 million at age 65. No wonder Einstein referred to compounding interest as the “eighth wonder of the world.”
As we accumulate it is important to consider our goals. What lifestyle do you want in retirement? You will need to know this to determine if you are in a position to reach this goal. Since accumulated savings, time and investment yield are the real drivers to your success, you need to measure yourself against benchmarks. Those benchmarks are important! They begin with a clear idea of just how much money you will need for your anticipated lifestyle.
We start with the goal and work backward. Once we know how much you will need, we determine if you are on target. Often a minor adjustment will make all the difference in the world. Doing a great job saving but improperly investing is a relatively easy course correction to make if we catch it early enough.
Once you are ready to retire, the toughest challenge awaits: how to get comfortable living off what you have accumulated. Our practice defines successful retirement planning as having our clients free of anxiety about their finances. We do this by addressing their concerns and being certain they are fully informed about all the issues that will affect their financial security. Good retirement planning should give you not only adequate resources but also peace of mind.
Reach Terry Lockridge & Dunn / World Trend Financial at their Cedar Rapids location, 319-364-2945, or their Iowa city location, 319-339-4884.