October 26, 2022

National Retirement Security Month: How To Start Actively Preparing for Retirement

Key Points 

  • National Retirement Security Month raises awareness and aids individuals to take steps toward a secure retirement.
  • Several actions you can take to prepare for retirement include getting an idea of the income you will need to retire, opening a retirement account, investing your funds, and saving early and often.
  • A Self-Directed IRA is a great tool to aid in your preparation for retirement, as it allows you to diversify your retirement portfolio by investing in a variety of assets.
Desk with a calculator, increasing bar graph, and “Retirement Plan” stated to show the importance of retirement planning, especially during National Retirement Security Week.

Are you prepared for retirement? Wow, what a big question! According to Blackrock’s 2022 Read on Retirement, retirement confidence is down with only 63% of workplace savers and 51% of independent savers feeling on track for retirement.  

Believe it or not, retirement planning is not as daunting as it may sound. To celebrate National Retirement Security Month, let’s explore how you can start actively preparing for retirement. The more prepared you are, the better off you will be in your golden years. 

What is National Retirement Security Month?

National Retirement Security Month was established to aid individuals to take steps towards a secure retirement by participating in employer-sponsored retirement plans or individual retirement accounts. In 2006, it was originally created as National Retirement Security Week and observed every third week in October. In 2021, the National Associate of Government Defined Contribution Administrators extended it to be a month-long celebration.  

What are the Benefits of a Retirement Plan?

Benefits of Setting up a Retirement Plan from the IRS for Employees and Employers

How To Start Actively Planning for Retirement

1. Get an Idea of the Income You Will Need to Retire

Although many people decide when they will retire based on age, you will likely benefit more from measuring the amount of funds needed to live comfortably in retirement. There are several online calculators that can help you do this.

Retired Couple walking in a park with a piggy bank and coins in front and a quote that reads “The question isn’t at what age I want to retire, it’s at what income.” - George Foreman.

When calculating, consider the kind of lifestyle you would like to have in retirement. Will you live in a lavish home or choose to downsize? What expenses will you have, such as healthcare costs or travel expenses? Will you be receiving Social Security benefits or any other sources of retirement income?  

Once you have an idea about the amount of funds you would like to have in your savings when you retire, you can plan your investment strategy accordingly. Speak with a financial advisor to establish an investment strategy that will help you achieve your financial goals. 

2. Open a Retirement Account with Your Employer or an Individual Retirement Account

Some employers offer a qualified retirement plan, such as a 401(k) or 403(b). You should consider taking advantage of this program and opening an account. Many employers “match” a percentage of what you contribute to your 401(k). For instance, if your company has a 3% match, everything contributed up to 3% will be matched by your employer dollar for dollar. This is essentially free money. 

Woman investor on her laptop opening a retirement account.

If your employer does not offer a sponsored retirement plan, consider opening an Individual Retirement Account (IRA). An IRA is a tax-advantaged account where you can choose to contribute pretax dollars to decrease your taxable income and pay taxes when you receive distributions (Traditional IRA) or pay taxes now and take all funds out tax-free (Roth IRA).

If you are looking for more investment options, you may consider opening a Self-Directed IRA. A Self-Directed IRA gives you the tax advantages of an IRA, but with the added freedom to invest beyond the assets that typical IRA brokerage accounts offer. With a Self-Directed IRA you can diversify your portfolio with assets like real estate, gold or silver, private companies, and promissory notes

3. Invest Your Funds & Diversify Your Portfolio

After you open your retirement account comes the most exciting part! You have the freedom to select the types of investments you want to place in your retirement portfolio. Consider diversifying your portfolio with a variety of assets, so they can balance each other out during market volatility. A truly diversified portfolio consists of both standard stock and bond type products and alternative assets.   

4. Start Early, Save Often

Time is a huge asset when it comes to retirement savings. If you are young, retirement may seem like decades away, but it goes by fast. The earlier you start saving and investing, the more you will benefit in retirement since your funds have more time to grow.

Two arrows pointing opposite directions, one says “spend” and the other “saving”. Quote on the bottom that reads, “Do not save what is left after spending, but spend what is left after saving.” - Warren Buffet.

For example, Sandra, age 25, starts investing $200 a month with a 6% return compounded monthly. By the time she turns 65, her nest egg is worth $398,298. If she waited until 35 to start saving $200 a month with the same rate of return, she would end up with about half the amount ($200,903). 

Additional Retirement Planning Tips

Icon of a computer tab with a dollar sign and information on it showing that you can automate your savings and contributions to a retirement account.

Automate Your Savings

Many employer-sponsored plans let you elect to automatically contribute funds from your paycheck to your retirement account. If you have an IRA, you can set up automatic transfers from your checking account to your retirement account. 

Icon stack of dollar bills showing that you can boost your retirement account contributions once you are age 50+.

Boost Contributions as You Age

If you are 50+ years old and have a qualified retirement account, you can take advantage of “catch-up contributions”. You can contribute an extra $6,500 to a 401(k) or $1,000 to an IRA in 2022.  

Icon dollar sign with two arrows circling it showing the importance of staying on track and rebalancing your portfolio often.

Stay on Track and Rebalance Your Portfolio

As the market changes and you get closer to retirement, look over your portfolio to ensure it is meeting your goals. When you are young, time is on your side so you can take a more aggressive approach. But if you are nearing retirement, you may choose to be more conservative and start to prepare for your transition. 

Icon of a hand holding a credit card showing that people should save money where possible.

Save Money Where Possible

Small money-saving actions can go a long way.  Consider going to the library for free books and movies, canceling unused subscriptions, riding a bike to local destinations, or purchasing store-brand merchandise. 

Conclusion: Let’s Tie It All Together

Everyone’s journey to retirement is unique. Investments, account types, and strategies are not one size fits all. However, everyone should consider planning and saving for their retirement, and what better time to do so than now during National Retirement Security Week!  

Do you have any questions about your journey to retirement? Our friendly and knowledgeable Self-Directed IRA Specialists are here to help!

Disclaimer: Madison Trust Company does not provide legal, tax or investment advice. Prior to making any investment decisions, please consult with the appropriate legal, tax, and investment professionals for advice.

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