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Start your retirement planning now

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Gary D. Meeks

By Gary Meeks

Many of you may recall a television commercial depicting everyday people moving about their day with a number above them representing the dollar amount of money they would need to be able to retire.  It happens to be one of my favorite commercials.
How much will you need for a comfortable retirement? Obviously, the answer to that question is individual and can’t be answered without some financial analysis of your personal situation, but I hope to give you some helpful tips you can use to prepare yourself for retirement.  
Start Saving Now:  The longer you wait, the more you will have to save to make up for lost time.  Get your money to work now.  Time may be the most important ally you have.  The power of compound returns can make a big difference over time; Example:  Paul (age 45) and Marie (age 25) both would like $600,000 saved by the time they reach age 65.  Let’s assume they both invest in large Cap mutual funds which average 10% per year.  They both start with 0 savings. Paul would have to save $790.13/month to reach his goal.  Marie has 40 years compared to Paul who only has 20 years to retirement.  The amount Marie needs to save monthly is $94.88.  What a difference!  This is a hypothetical example for illustrative purposes only.  Since its inception in 1928, through 2017 the S&P500 has averaged approximately 10%.  Returns on mutual funds may vary and are not guaranteed.
Source: https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
Participate in your Employers matching retirement plan:  You put money into the plan through payroll deductions and your employer also makes contributions to your account, how can you pass that up?  That’s extra money, just for participating in the plan.  If Paul & Marie in the example above were participating in an employer matching 401k, the monthly amount they would need to save to reach their goal would be even less.  
Employer doesn’t offer a matching retirement plan? Start a Traditional or Roth IRA.  IRA’s have contribution limits and tax consequences for early withdrawals.  For complete details consult with a tax advisor or financial consultant.
If Available,  Participate in your employers Health Savings Account (HSA):
Likely one of the largest expenses you will face in retirement is health care costs.  A Health Savings Account (HSA) allows you to save money for health care expenses before taxes.   If withdrawals are used for qualified health care expenses you will not pay tax on these expenses. You may also get some match on this from your employer.   At retirement you can keep your HSA and continue to use it to pay for health care expenses, so put as much as you can into it.  Once you meet a min. account balance, often the plan will allow you to invest the HSA money into mutual fund options with potentially higher returns, but with greater risk.  HSA accounts are becoming an increasingly important tool in planning for retirement.  
Get that Mortgage Paid Off: Less expenses in retirement means more money to do things you enjoy.  Not having a mortgage payment will make things a lot easier for you, not to mention giving you peace of mind that your home is free & clear of debt.  Avoiding credit card debt is also smart.  If your mortgage doesn’t end before you retire, consider making extra payments if you can.  When you make an extra payment write a note with your payment asking the bank to apply the extra payment to principal-this will reduce your mortgage balance faster.  When you get that tax return, take half of it and make an extra payment on your mortgage.  
Get a Plan! Act Now! Make it happen!

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