When Should I Start Planning and Saving for Retirement?

Retirement may seem like a distant milestone, especially when you're juggling current financial obligations. However, when it comes to planning for your retirement, the question isn't just "When should I start?" but rather, "How soon can I start?" We believe that proactive planning is the key to achieving financial security, and that includes your retirement. So, let’s dive into when you should start planning and saving for retirement.

The Earlier, the Better

If there's one piece of advice that stands the test of time, it's this: the earlier you start saving for retirement, the better. Why? Because starting early allows you to take full advantage of compound interest, the process where your investment earnings generate even more earnings over time. This can significantly grow your retirement savings.

But what if you're already past your 20s or 30s? Don’t worry—it's never too late to start. The key is to begin as soon as possible and be consistent with your contributions. Even small amounts saved regularly can grow significantly over time.

Understanding Your Retirement Goals

When it comes to retirement, one size does not fit all. The amount you need to save depends on your specific retirement goals. Do you envision traveling the world, downsizing to a cozy home, or maybe starting a small business in your retirement years? Each scenario requires a different level of savings.

Start by setting a clear financial vision for your retirement. Ask yourself questions like:

• At what age do I want to retire?

• What kind of lifestyle do I want to maintain?

• What will my monthly expenses likely be?

Once you have a clear picture of your retirement goals, you can estimate how much you'll need to save. This will give you a target to work towards, making it easier to stay motivated and on track.

Adjusting Your Plan as Life Changes

Life is unpredictable, and your retirement plan should be flexible enough to adapt to changes. Whether it’s a career change, starting a family, or experiencing unexpected health issues, these events can impact your retirement savings strategy.

It's important to regularly review your retirement plan and adjust it as needed. For example, if you receive a raise, consider increasing your retirement contributions. Or, if you experience a significant life change, reassess your retirement goals to ensure they still align with your current situation.

Being flexible doesn’t mean being passive. Regularly monitoring your progress and making informed adjustments will help you stay on course to achieve your retirement goals.

The journey to a secure retirement begins with a single step, and the best time to take that step is now. By starting early, setting clear retirement goals, and being flexible as life changes, you can create a solid plan for your future. Remember, retirement planning is not a one-time event but an ongoing process that evolves with you.

Bad Retirement Advice To Avoid

As you plan for your retirement, you're likely to receive advice from various sources. While some advice can be helpful, there are also common misconceptions and bad advice that could derail your retirement planning. Here are three pieces of bad retirement advice you should avoid:

1. You Can Start Saving for Retirement Later

How many times have you said, ‘I’ll get to that tomorrow.’ One of the most detrimental pieces of advice is to postpone saving for retirement. The earlier you start saving, the more time your money has to grow through compound interest. Waiting too long can significantly reduce the amount you'll have available for retirement. Even small contributions early on can make a big difference in the long run. You’ll never regret investing early. 

2. You'll Spend Less in Retirement

While it's true that some expenses, like commuting and work-related costs, may decrease in retirement, others, such as healthcare and leisure activities, may increase. What will your retirement look like? Create a plan with your spouse and identify what your wants and needs are for that season of life. Failing to account for potential increased costs can lead to underestimating your retirement needs. It's important to plan for a comfortable lifestyle in retirement, which may require maintaining or even increasing your current level of savings.

3. You Can Rely Solely on Social Security

Social Security is designed to supplement, not replace, your retirement income. Depending solely on Social Security may not provide enough to support your desired lifestyle in retirement. It's important to have additional sources of income, we recommend at minimum three streams of passive income, such as a 401(k), IRA, or other investments, to ensure a financially secure retirement and future! 

As you plan for your retirement, it's important to seek advice from trusted financial advisors and sources. Avoiding these common misconceptions and bad advice can help you make informed decisions and secure a comfortable retirement. Start saving early, plan for realistic expenses, and diversify your sources of retirement income for a more fully funded financial future! 

How Much Money Do You Need To Retire

If you've been a regular visitor to this space, you already know our team at I Was Broke. Now I’m Not. values planning – especially when it comes to dollars and cents. Today, let's dive into a topic that's not just important but downright crucial – calculating the magic number for your retirement. Because let's face it, knowing how much money you need to retire is as vital as sunscreen on a scorching day.

So, let's cut to the chase. How much money do you need to retire? It's not just a rhetorical question. Do you know how much you need?  It’s easy!  Take a mere five minutes – yes, you heard it right – to complete the following two tasks. It's a mini-financial adventure that promises to be worth every second.

TASK 1 - Calculate Your Number

Head over to our tools page and fill out the form! When you do so, you will receive access to several tools, but for today locate the tool: Retirement Nest-Egg Calculator

Within moments, you'll have a clearer picture of the nest egg required to retire in style.

TASK 2 - Face the Question: Are You Going To Retire Well?

Now, armed with your newfound knowledge, it's time for a bit of reflection. Are you on track to retire well? Does your current plan align with your retirement aspirations? This isn't just about numbers; it's about the life you want to lead when your work-life becomes a distant memory.

The challenge is set. Take those five minutes, tackle the tasks, and unlock the door to a future where retirement isn't a question mark but an exclamation point!

Should You Withdraw From Your Savings Prior To Retirement?

The temptation to dip into your retirement savings early can sometimes be alluring. No matter how alluring, you should NOT withdraw early! Here’s why?

1. You lose the opportunity for your money to grow tax-deferred

2. The time value of money is crushed when you pull out the money you have saved for retirement.  You will never get that time back!

3. If you pull money out of your retirement plan early, it will be subject to taxes PLUS a 10% penalty.

4. You will have to recognize the withdrawal as income for that year which will usually bump you up a couple of tax brackets.

5. It is a VERY EXPENSIVE way to obtain money. You will ultimately pay around 45% taxes on the money you withdraw! If you pull out $50,000, you will actually bring home $27,500! Taxes and penalties will cost you $22,500! That is worse than a credit card!

6. Are you viewing this cash withdrawal as a way to avoid more debt? I have seen too many cases where money is withdrawn (very expensively) and without a change in spending behavior. Don’t put yourself in a position to end up with zero or very little in their 401(k) PLUS a pile of debt that increases every month!

7. FINAL REASON: It’s for RETIREMENT!

Retirement plans are designed to secure your future when you decide to retire. Withdrawing early disrupts this purpose and may hinder your ability to achieve financial independence later in life. Instead, consider alternative financial strategies to address immediate needs without compromising your retirement goals..

3 Things Sabotaging Your Retirement

Retirement is a time in life that many of us eagerly look forward to. It's a period when we hope to enjoy the fruits of our labor, travel, spend time with loved ones, and pursue hobbies and interests. However, achieving a comfortable retirement requires careful planning and financial discipline.

Let’s discuss three common mistakes that can sabotage your retirement if you’re not careful!

You Haven't Started Saving

Time can be your most valuable asset in building a substantial retirement fund. The power of compounding allows your investments to grow exponentially over time. When you delay saving for retirement, you miss out on the potential for your money to grow.

Start saving for retirement as soon as possible, even if you can only contribute a small amount initially. Set up automatic contributions to retirement accounts like a 401(k) or an IRA, and increase your contributions as your income grows.

You Haven't Determined Your Retirement Nest-Egg Amount

Having a clear retirement savings goal is crucial for a successful retirement plan. Without a specific target in mind, you may not know how much you need to save or whether you're on track to meet your retirement goals. Determine your retirement nest egg amount HERE! Once you have a target amount, you can create a savings plan to work towards that goal.

You Have Pulled Money Out of Retirement Accounts Early

Early withdrawals from retirement accounts, such as a 401(k) or an IRA, can result in penalties, taxes, and lost potential growth. These accounts are designed to provide financial security during retirement, and withdrawing funds prematurely can significantly derail your retirement savings plan.

Planning for retirement is a lifelong journey that requires commitment and financial discipline. Avoiding common mistakes will help you achieve your retirement plans, hopes, and dreams!