U.S. News’ article, “5 Pit Stops for Better Retirement Planning,” advises those saving for retirement to look at the racing world and build in some “pit stops” on the way to their golden years. This type of pit stop is a break to check your investment performance, review your portfolio and get back in the race to a rewarding and enjoyable retirement.
Experts suggest that you use key birthdays as critical checkpoints. They’re good reminders to take stock of where you are and how you want to shape your future. Take a look at these important birthdays from a financial planning viewpoint:
On your 21st birthday, or as soon after that as you start to earn money, also start saving long-term. You can invest in a 401(k) plan at work to get company matching contributions.
On your 30th birthday, check on your savings. You have only 10 years until age 40, and the money you save before 40 is almost equal to what you’ll save for the rest of your life after that point, as far as compounding returns.
On your 45th birthday, you're going to be in the "sandwich" position. You may have parents who are around age 70 or so with college-age kids or recent grads. This is an ideal pit stop for your trust and estate planning, so that you and your children are ready for the issues associated with this sometimes difficult time.
By age 62, you should be concentrating on your needs—from 50 to 62, your earnings must help you prepare for retirement. At age 62, you are also now eligible for Social Security, but the longer you can wait before drawing on your Social Security payout, the better. You’ll realize a sizeable jump in income, if you wait until 70.
Ok, so your 70th is the magic birthday. You can now withdraw from Social Security at the highest rate and place that money into other safe investments. At age 70½, you are required to withdraw from your 401(k).
Every birthday is special, but also all of these retirement pit stops are important. Plan your pit stops around these key birthdays, and be sure that your retirement savings plan is all fueled up and ready to hit the road.
Reference: U.S. News: (December 5, 2016) “5 Pit Stops for Better Retirement Planning”