The issues you face and the steps you need to take are greatly affected by the length of time before your retirement...if retirement is far down the road or if retirement is approaching fast…
If retirement is far down the road, your primary task is to start saving now. Even small amounts, if saved steadily over several decades, will yield big results. If you wait “until things are more settled,” you lose the opportunity to let your investments grow over time.
Example:
$100 invested each month for 35 years with a 10% return will yield nearly $380,000. Double the amount invested monthly with an employer match and you'll have nearly $760,000 stockpiled for your retirement.
If you wait ten years before you start investing, you'll need to save $285/month ($570 with employer match, if the employer match goes that high) to reach the same goal.
Not sure you can afford to save? Start small. Even $25/month is worthwhile. Then gradually increase your monthly savings. As soon as possible, begin to claim the full amount of your employer match if you have one.
If you're young, time is on your side! "Begin by Planning Today" - PM 1816 (pdf) is designed to help you get off to a great start. For more guidance in choosing investments, download “Growing Your Nest Egg” - PM 1821 (pdf).
If retirement is approaching fast...
You have many decisions and plans to make before you retire.
Defining your retirement plans more clearly is an important step toward being prepared both personally and financially. Where will you live? What kind of lifestyle do you expect? “Picture Your Future” - PM 1817a (pdf) will help you clarify your retirement plans. Be sure to discuss your plans with your spouse or partner – sometimes couples are surprised to discover that they are not on exactly the same wavelength! Advance discussion will certainly ease the transitions and improve your chances of having a retirement that fulfills both partners’ dreams.
It is also wise to talk with extended family about your retirement plans. Your plans affect them, and their needs or desires may affect your plans.
Once you have a fairly clear picture of your goals, “Estimating Retirement Expenses” - PM 1818b (pdf) can be a first step in calculating how well your finances accommodate your goals.
At the time you retire, you will face a number of decisions, including various options for retirement plan payout. To structure your finances in a way that fits your needs, you’ll want to make well-informed choices. Your employer’s personnel office is a key resource in this process. “Decisions at the Time of Retirement” - PM 1825 (pdf) provides background information that will help you be prepared for your meetings with personnel staff.
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