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Ten Ways to Prepare for Retirement

Published: February 15, 2024

Ten Ways to Prepare for Retirement

Achieving financial security in retirement is a deliberate process that requires planning, commitment, and financial dedication. Regardless of your aspirations, initiating savings and strategic planning today is a prudent move. The Employee Benefits Security Administration (EBSA) provides ten valuable recommendations to aid in your preparation.

1. Initiate and Maintain Savings with Defined Goals:

If you are already saving, continue the habit, be it for retirement or other objectives. Recognize the rewards of saving and, if you haven't started, commence with a modest amount, gradually increasing it. Prioritize saving for retirement by establishing a plan, adhering to it, and setting achievable goals. The sooner you begin, the more your money can accumulate over time.

2. Understand Your Retirement Requirements:

Retirement entails significant expenses. Experts suggest aiming for 70 to 90 percent of your pre-retirement income to sustain your lifestyle post-employment. Take control of your financial future by planning ahead and understanding your retirement needs.

3. Contribute to Employer's Retirement Savings Plan:

Enroll in your employer's retirement savings plan, such as a 401(k), and contribute the maximum amount feasible. This not only reduces taxes but may also attract additional contributions from your employer. Automatic deductions streamline the process, and the impact of compound interest and tax deferrals can be substantial.

4. Familiarize Yourself with Employer's Pension Plan:

If your employer offers a traditional pension plan, grasp its coverage and functioning. Request an individual benefit statement to assess your entitlement. Before job changes, inquire about the fate of your pension benefits and explore benefits from previous employers or a spouse's plan.

5. Adopt Basic Investment Principles:

Recognize the significance of how you save alongside the amount you save. Understand the impact of inflation and investment types on your retirement savings. Diversify investments to manage risk and enhance returns. Regularly reassess your investment mix based on factors like age, goals, and financial circumstances.

6. Contribute to an Individual Retirement Account (IRA):

You can put up to $7,000* a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages.

When you open an IRA, you have two options – a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save.

* The annual contribution limit for 2023 is $6,500, or $7,500 if you’re age 50 or older. The annual contribution limit for 2024 is $7,000, or $8,000 if you're age 50 or older. See IRA Contribution Limits.

7. Preserve Retirement Savings:

Resist withdrawing retirement savings prematurely to avoid losing principal, interest, or facing withdrawal penalties. If changing jobs, leave savings in the current plan or transfer them to an IRA or new employer's plan.

8. Advocate for Employer Retirement Plans:

If your employer lacks a retirement plan, propose establishing one. Various saving plan options exist, and a simplified plan can benefit both employees and employers.

9. Understand Social Security Benefits:

Research your Social Security retirement benefits, which typically replace 40 percent of pre-retirement income. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration’s website. For more information, visit their website or call 1.800.772.1213.

10. Seek Information and Guidance:

While these tips provide a foundation, seek additional information. Consult your employer, financial institution, union, or financial advisor. Pose questions, comprehend the answers, and take practical steps promptly.

Retirement Central puts a variety of resources at your fingertips.

Our web-based platform is designed to make retirement planning more convenient by providing education, planning tools, online account management features and articles all in one place.

Explore Retirement Central

More Information:

This article comes from the Employee Benefits Security Administration publication: Top 10 Ways to Prepare for Retirement. Visit their website to view more information in the following publications:

Women and Retirement Savings

Retirement Toolkit

Taking the Mystery Out Of Retirement Planning

What You Should Know About Your Retirement Plan

Filing a Claim for Your Retirement Benefits

The following websites can also be helpful:

This information is intended for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice must be obtained on your own separate from this educational article.

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