Retirement Planning Basics
For some of us, retirement may seem a long way off. But consider this: the steps you take now will have an enormous influence on the quality of your life 10, 20, 30 or 40 years from now. Whatever your age, the time to start planning your retirement is now. All it takes is five simple steps.
STEP 1: Establish clear, simple, and memorable goals.
Ask yourself, “When do I want to retire?” and “How much money will I need to retire?” Check out our Visual Retirement Planner in our related tools to help you answer these questions.
STEP 2: Put yourself on track to meet your goals.
When you retire, you’ll want to have enough money to enjoy your free time and maintain your current lifestyle. The sooner you start putting money away, the more time it has to grow. Start a monthly transfer from your checking account to your investment account.
STEP 3: Make regular contributions to your company retirement plan.
If your employer offers a 401(k) or 403(b) plan, participate to the maximum. Your contributions are made with tax-deferred dollars so they may reduce your taxable salary, and both contributions and earnings can grow tax-deferred until they’re withdrawn. If your employer matches your contribution, you’re throwing away free money if you don’t participate.
STEP 4: Contribute regularly to an IRA.
If you’re not covered by a company retirement plan, make regular contributions to an IRA. Regardless of the type of IRA you qualify for – Traditional or Roth – your savings will grow tax-deferred. And even if you’re contributing to a plan at work, consider putting some additional money in an IRA. To get on the fast track to retirement, go to our products and services page to view Wells Fargo retirement accounts and the type of IRA that best suits your situation.
STEP 5: Review your goals and track your progress annually.
Read your retirement plan statements and continue to monitor your spending. Are you on target? Remember, you’re involved in a marathon, not a sprint: day-to-day fluctuations in the stock market will have little bearing on your long-term goals.
A rule of thumb
By the time you’re ready to retire, you probably won’t have the same expenses you do now. Some costs will decrease while others will increase. Many financial planning experts estimate that you may need as much as 60% to 80% of your current annual after-tax income to live on through your retirement to maintain your current lifestyle. Think about how you can trim expenses now in order to save more for the future. The sooner you start, the less painful it will be.