It’s Never too Early to Start Thinking About Retirement
Unless retirement is in the next couple of years, it usually seems like a long way off. It is easy to procrastinate on important issues when you feel as if you have all the time in the world. But, before you know it, you will be ready to retire. Will you be prepared?
If you answered no, then now is time to start planning for your future. Nick Manley, Director of Financial Planning at Haydel, Biel & Associates, recommends that every adult start thinking of retirement planning sooner rather than later. “When new clients come in, we take an inventory of all of their assets, their liabilities, income, expenses and we’ll run a comprehensive retirement plan,” said Manley.
“Most commonly we deal with clients whose kids have grown up and they’re now thinking about the next stage in their life – late 40s, early 50s,” said Manley. But the sooner you start planning, the more you’ll save. A 30 year old who starts saving $1,000/month at 6% will have $1.37 million at age 65, whereas a 40 year old who starts saving $1,000/month will have only $676,000 at age 65 (less than half!) “It’s not just baby boomers, but it’s people finishing college and starting a full time job that need to start planning, I mean obviously the earlier you start, the more time you have for compound interest to work its magic,” he added.
Some individuals never stop working but the majority of Americans plan to retire at social security age, which is 66 or 67. Manley adds that if a client wishes to retire sooner they can help the client plan to be able to achieve this goal.
But not everyone is employed by a large company. What if you are a small business owner or a freelance worker? What options are available for you? “For freelancers and for small business owners it takes more effort and planning on their behalf but certainly it’s achievable with the help of the right retirement plan in place,” he added.
Manley suggests the “Individual 401k.” “We recommend that over the SEPIRA just because it usually allows for a higher contribution limit. Self-employed individuals can contribute and deduct on their taxes $18,000 or $24,000 if over age 50. This is in addition to a profit sharing contribution for a combined deduction limit of $53,000,” said Manley. When you retire you want to continue to enjoy the same standard of living you have worked so hard for. “Usually we’ll aim for no drop in living standard…. We offer software where clients can link up their bank accounts and it will track their annual spending categories, which helps provide them with a more accurate picture of their needs and goals when planning,” said Manley.
If you get into specifics and find your retirement forecast is not what you had hoped for there are tweaks you can make to ensure you achieve your goal. Manley suggests clients downsize their homes, consider renting, look into relocating, or as a last resort, a reverse mortgage. But, the best way to avoid this predicament is to start saving early. “Everyone should start thinking about it as soon as possible,” said Manley.
If you are ready to get in touch with a professional who can help you achieve your retirement goals you can reach Haydel Biel & Associates at (626) 529-8347. They are located at 100 Corson St. #310 in Pasadena. You can visit them at www.hbawealth.com.
By ANGELA MORGAN
Pasadena Living - Wednesday, November 4, 2015