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  • News
    • 2021 News Articles >
      • 2021 January Market update - A rollercoaster year ends on a high note
    • 2020 News Articles >
      • December Client Letter - Cruising at 30,000 Feet
      • 9 Tax Facts & Tips to Save You Money
      • 9 Smart Planning Moves to Consider
      • November Client Letter - Election 2020
      • 7 Financial Planning Steps for Year End 2020
      • 6 Tips on Filing the FAFSA
      • Circling Back to the SECURE Act!
      • A September Pothole
      • 6 Steps That Put You on the Path to a Successful Retirement
      • Consumer Scams Part 2
      • September 2020 Client Letter
      • Consumer Scams
      • May Client Letter-- Worst-Ever Economy Yet Stocks Show Best Monthly Gain Since '87
      • Why Waiting For A Market Rebound Could Cost You
      • How The Greatest Generation Approached September 11th
      • Laid Off And Near Retirement - What Now?
      • The SECURE Act
      • Market update: When favorable fundamentals collide with uncertainty
    • 2015 News & Articles >
      • To be happy, be grateful. - It's science!!
      • Market Volatility - So Now What?
      • Retirement planning: Start early or start late – just start
      • 2015 Financial Planning Checklist
      • 2014 In Review - A bullish mood and risks that dot the landscape.
      • A sneak peek at 2015 – What to keep an eye on
      • Getting The Most Out of Financial Aid for College
    • News - Archives >
      • 2014 - Cheaper by the Dozen: 12 smart year end planning moves
      • 2014 - How safe is your personal information?
      • 2014 - Hey, what’s your number?
      • 2014 - What did we do before GPS?
      • 2014 - Changing Jobs Checklist
      • 2013 - US Government Shutdown - What it means
      • 2013 - Investing in College
      • 2012 - Getting (back) on track - The best part of my job…
      • 2011 - The Henny Penny School of Investment Wisdom
      • 2011 - 8 Ways to Help Couples Overcome Money Conflicts
      • 2011 - Intelligent Computer Shopping
      • 2011 - 7 things you and your student should discuss before they head off to college
      • 2011 - 7 mistakes to avoid when exiting your business
      • 2011 - Why you need an Estate Plan even if you don’t live in a mansion
      • 2011 - Celebrating Irish Heritage
      • 2010 - Priorities: Retirement Planning Vs College Savings for Children
      • 2010 - in review, and a look toward 2011
      • 2010 - New Years Resolutions - 2011
      • 2010 - Business Owners – a special case for diversification
      • 2010 - Year End Planning 2010
      • 2010 - Paying for college - Applying for student aid, determining your Expected Family Contribution
      • 2010 - Paying Taxes
      • 2010 - Job-Loss
      • 2010 - Habits
      • 2009 - Shopping
      • 2009 - Gift-Idea
      • 2009 - Thanksgiving
      • 2009 - Q3
      • 2009 - Recovery
      • 2009 - Results
      • 2009 - Digging
      • 2009 - Time
      • 2009 - Considering
      • 2008 - Planning
      • 2008 - Resolutions
    • Life Transitions >
      • Get A Job/Leave Job >
        • 9 Questions to ask your CPA at tax time
        • Getting (back) on track - the best part of my job
        • Changing Jobs Checklist
        • Job Loss
        • Taxes - 7 ideas to ease the burden - 2018
        • Year End Planning Checklist: 12 smart planning moves to consider
      • Marriage/Divorce/Re-Married >
        • 8 Ways to Help Couples Overcome Cash Conflicts
      • Kids (Birth/College/Marriage) >
        • 7 Things you and your student should discuss before they head off the college
        • Getting The Most Out of Financial Aid For College
        • Investing In College
        • Budgeting For Students
        • Save on Textbooks
        • Subsidized vs unsubsidized loans – what’s the difference?
        • 7 Tips for Your College Bound Student
        • “What I did on my Summer Vacation – 2019”
        • Budgeting for College Students - 2018
        • Most Significant FAFSA Changes in over 20 Years!!
        • Direct 529 Plan Changes To Be Implemented
      • Birth/Death >
        • Is a cash windfall in your future?
        • Planning for People with Special Needs
    • Client Letters >
      • 2019 - July Client Letter: Records Are Made To Be Broken
      • 2018 - Summer's Hot Issues
      • 2018 - November Market Update:
      • 2016 - January Client Letter - A volatile year ends with a whimper
      • 2016 - September Letter to Clients: The Ides of September?
      • 2016 - November Letter to Clients: The Final Countdown?
      • 2016 - December Letter to Clients: Near Term Impact of Trump's Victory
      • 2015 - September Client-letter: Looking past scary headlines
      • 2015 - November Client Letter: The Clouds Part
      • 2015 - December Client Letter, A Baker's Dozen: 13 Smart Planning Moves

6 Steps That Put You on the Path to a Successful Retirement

Achieving your financial goals doesn’t just happen by itself. It takes a plan, implementing the plan, adhering to the plan, and when necessary, adjusting the plan.  Simply put, failing to plan is planning to fail. Don’t plan to fail! 

According to the Department of Labor,
  • Only 40% of Americans have calculated how much they need to save for retirement.
  • In 2018, almost 30% of private industry workers with access to a 401(k) plan or something similar did not participate.
  • The average American spends roughly 20 years in retirement.

​Nearly everyone will receive Social Security, but Social Security won’t pay all the bills.
  1. Regularly saving is critical. Once you begin an automatic payroll deduction into a retirement account, you won’t miss it. I promise. An initial goal to put 10% of pretax income in your 401(k) might seem like a mighty big chunk of cash, at least in the beginning. If so, perhaps start with 4%, raise it to 7% after three months, and bump it up to 10% three months later. Taking baby steps might be easier than attempting to summit the peak in one leap.  Either way, I can’t over emphasize the importance of capturing your entire company’s match. It’s free money. Don’t leave free cash with your employer.
  2. Start as early as you can. It won’t be long before my daughter graduates from college. In her mind, retirement is another planet, if not another universe. That’s the case for many young people.  But we all know the magic of compounding. The savings we socked away when we were younger has paid big dividends.
 
Here’s another story. A friend of mine in his early 50s is semi-retired. Yet, he sometimes laments that he started saving when he was 26 and not 22. For many, he’s ahead of the game, even if he didn’t start right out of college. Still, his decision to start early and max out his contributions put him on the path to financial freedom.

Let’s illustrate by way of example. Tom is 28 years old and plans to save $500/month or $6,000 per year until he retires at 65. With an annual return of 7% (assuming annual compounding), Tom will have amassed $962,024 when he turns 65 years old. Total contributions: $222,000.
​
Kate decides to put away the same amount. Kate is 22 years old and will save for 43 years. While her time to contribute is only an additional six years, her decision to start early is rewarded with a portfolio of $1,486,659. Total contributions: $258,000.

Because Kate started sooner, the additional $36,000 amounted to an additional $524,635! (Source: Investor.Gov calculations assume a tax-deferred account.)
  1. What plan best fits my need? That question will depend on your personal circumstances. For many, your company’s 401(k) is tailor-made to save for retirement. This is especially true if your firm has a matching contribution.  Whether to fund a traditional IRA or a Roth IRA depends on many factors, including your marginal tax rate today and expected rate in retirement.    A Roth offers tax advantages if you qualify. Generally speaking, withdrawals from a Roth IRA are tax-free in retirement if you are age 59½ or older and have held the account for five years. But you won’t capture a tax deduction on contributions.   Current tax law does not require minimum distributions, which can be a big advantage as you travel through retirement.  A Roth may also be advantageous if you do not believe your marginal tax rate will fall much in retirement or if you have outside assets that limit your need to withdraw on your retirement savings.
  2. How much will I need at retirement? Again, much will depend on your individual circumstances. Your retirement expenses and lifestyle will dictate your portfolio needs.  An old rule of thumb that you’ll need 70% of pre-retirement income may not suffice for many. For example, will you still be paying on a mortgage after you retire? Or, do you plan to downsize, which may reduce or eliminate monthly mortgage outlays?   One approach some folks consider is the 4% rule. It’s relatively simple. Withdraw 4% of your total investments in the first year and adjust each year for inflation. Keep in mind, however, that this is a rigid rule. It assumes a 30-year time horizon and minimizes the risk of running out of money.  Depending on Social Security and any pension you may have, a more generous “allowance” from your savings may be in order.
  3. How do I find the right mix of investments? What worked when you were 30 years old probably isn’t appropriate today.  While our advice will vary from investor to investor, we can offer broad guidelines. Furthermore, retirement may be broken into different stages, which may require adjustments to the plan.   Some investors decide its best to take a very conservative approach. You know, “I can’t lose what I’ve accumulated because I don’t have time to recoup losses.” But that has its drawbacks. For starters, you don’t want to outlast your money. Equities, which have historically offered more robust returns, may still be an important part of an investment strategy.  Others may be swept up by what might be called “the current of the day.” Stocks have surged, which may encourage investors to load up on risk. However, a comprehensive financial plan helps remove the emotional component that can creep into decisions.
  4. I’ve saved all my life. How do I begin withdrawing from my savings? It’s a complete shift in the paradigm. No longer are you socking away a percentage of each paycheck. Instead, you are living off your savings.   First, if you are required to take a minimum distribution from a tax deferred account, take it.  Next, consider interest, dividends and capital gains distributions from taxable investments, which continues to tax shelter assets in retirement accounts.  If additional funds are needed, consider withdrawals from your IRA or other tax-deferred accounts. If you are in high tax bracket, you may consider pulling from your Roth. Those in a lower tax bracket could leave the Roth alone and take funds from their traditional IRA.

Bottom line
Let me reiterate that many of these principles are simply guidelines. One size does not fit all. Plans we suggest are tailored to one’s specific needs and goals. If you have any questions, we would be happy share our recommendations. We’re simply a phone call or email away!
 


Your comments and questions are always welcome.
We look forward to hearing from you.  mail@kyleshill.com


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The information being provided is strictly as a courtesy.  When you link to any of the web sites provided here you are leaving this web site.  We make no representation as to the completeness or accuracy of information provided at these web sites.  Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site.  When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.  

- John Davidson, CFP
  • Home
  • Background
    • About Us
    • Q&A
    • Disclosures
    • Privacy Policy
  • Services
    • Planning Process
  • Clients
    • Business Owners
    • Individual Professionals, Families, Retirees
  • Contact Us
    • Newsletter Sign-Up
    • Useful Websites & Quick Hits
  • Account Access
  • News
    • 2021 News Articles >
      • 2021 January Market update - A rollercoaster year ends on a high note
    • 2020 News Articles >
      • December Client Letter - Cruising at 30,000 Feet
      • 9 Tax Facts & Tips to Save You Money
      • 9 Smart Planning Moves to Consider
      • November Client Letter - Election 2020
      • 7 Financial Planning Steps for Year End 2020
      • 6 Tips on Filing the FAFSA
      • Circling Back to the SECURE Act!
      • A September Pothole
      • 6 Steps That Put You on the Path to a Successful Retirement
      • Consumer Scams Part 2
      • September 2020 Client Letter
      • Consumer Scams
      • May Client Letter-- Worst-Ever Economy Yet Stocks Show Best Monthly Gain Since '87
      • Why Waiting For A Market Rebound Could Cost You
      • How The Greatest Generation Approached September 11th
      • Laid Off And Near Retirement - What Now?
      • The SECURE Act
      • Market update: When favorable fundamentals collide with uncertainty
    • 2015 News & Articles >
      • To be happy, be grateful. - It's science!!
      • Market Volatility - So Now What?
      • Retirement planning: Start early or start late – just start
      • 2015 Financial Planning Checklist
      • 2014 In Review - A bullish mood and risks that dot the landscape.
      • A sneak peek at 2015 – What to keep an eye on
      • Getting The Most Out of Financial Aid for College
    • News - Archives >
      • 2014 - Cheaper by the Dozen: 12 smart year end planning moves
      • 2014 - How safe is your personal information?
      • 2014 - Hey, what’s your number?
      • 2014 - What did we do before GPS?
      • 2014 - Changing Jobs Checklist
      • 2013 - US Government Shutdown - What it means
      • 2013 - Investing in College
      • 2012 - Getting (back) on track - The best part of my job…
      • 2011 - The Henny Penny School of Investment Wisdom
      • 2011 - 8 Ways to Help Couples Overcome Money Conflicts
      • 2011 - Intelligent Computer Shopping
      • 2011 - 7 things you and your student should discuss before they head off to college
      • 2011 - 7 mistakes to avoid when exiting your business
      • 2011 - Why you need an Estate Plan even if you don’t live in a mansion
      • 2011 - Celebrating Irish Heritage
      • 2010 - Priorities: Retirement Planning Vs College Savings for Children
      • 2010 - in review, and a look toward 2011
      • 2010 - New Years Resolutions - 2011
      • 2010 - Business Owners – a special case for diversification
      • 2010 - Year End Planning 2010
      • 2010 - Paying for college - Applying for student aid, determining your Expected Family Contribution
      • 2010 - Paying Taxes
      • 2010 - Job-Loss
      • 2010 - Habits
      • 2009 - Shopping
      • 2009 - Gift-Idea
      • 2009 - Thanksgiving
      • 2009 - Q3
      • 2009 - Recovery
      • 2009 - Results
      • 2009 - Digging
      • 2009 - Time
      • 2009 - Considering
      • 2008 - Planning
      • 2008 - Resolutions
    • Life Transitions >
      • Get A Job/Leave Job >
        • 9 Questions to ask your CPA at tax time
        • Getting (back) on track - the best part of my job
        • Changing Jobs Checklist
        • Job Loss
        • Taxes - 7 ideas to ease the burden - 2018
        • Year End Planning Checklist: 12 smart planning moves to consider
      • Marriage/Divorce/Re-Married >
        • 8 Ways to Help Couples Overcome Cash Conflicts
      • Kids (Birth/College/Marriage) >
        • 7 Things you and your student should discuss before they head off the college
        • Getting The Most Out of Financial Aid For College
        • Investing In College
        • Budgeting For Students
        • Save on Textbooks
        • Subsidized vs unsubsidized loans – what’s the difference?
        • 7 Tips for Your College Bound Student
        • “What I did on my Summer Vacation – 2019”
        • Budgeting for College Students - 2018
        • Most Significant FAFSA Changes in over 20 Years!!
        • Direct 529 Plan Changes To Be Implemented
      • Birth/Death >
        • Is a cash windfall in your future?
        • Planning for People with Special Needs
    • Client Letters >
      • 2019 - July Client Letter: Records Are Made To Be Broken
      • 2018 - Summer's Hot Issues
      • 2018 - November Market Update:
      • 2016 - January Client Letter - A volatile year ends with a whimper
      • 2016 - September Letter to Clients: The Ides of September?
      • 2016 - November Letter to Clients: The Final Countdown?
      • 2016 - December Letter to Clients: Near Term Impact of Trump's Victory
      • 2015 - September Client-letter: Looking past scary headlines
      • 2015 - November Client Letter: The Clouds Part
      • 2015 - December Client Letter, A Baker's Dozen: 13 Smart Planning Moves