Financial Fitness: National Retirement Planning Week
GREEN BAY (WLUK) -- Are you ready for retirement? Are you ready financially? Even if it's way in the future, you might not be! A recent study showed 25 percent of workers say they'll never retire.
This is National Retirement Planning Week and financial expert Kevin Klug from Secure Retirement Solutions joined Rachel Manek on Good Day Wisconsin to go through some important Milestones on the road to retirement.
Rachel Manek: : Why is it so important to spend a week talking about retirement?
The retirement of your dreams is not a guarantee!
More than half of U.S. families are at risk of not being able to maintain their standard of living in retirement. (Source if you choose to use fact: Center for Retirement Research at Boston College)
If you want to retire on your terms, you need a plan that covers all areas of your finances.
Rachel: Let's run through some of the milestones in retirement planning.. and start with Age 30:
You cannot start saving for retirement too early. Ideally, you should start preparing for your last day of work on your first day.
A good goal is to have your annual salary in your retirement accounts by the time you hit 30 years old. (Source if you choose to use stat: Fidelity)
It may seem daunting when you’re first starting out, but saving a little can go a long way, thanks to the power of compound interest.
You want to at least save enough in your 401(k) to get the match from your employer - that’s free money!
Keep increasing your savings with each raise and work your way up to saving 10% - 15% of each paycheck.
Turning 50 is an important birthday because you can really ramp up your retirement savings.
At age 50, you become eligible for catch-up contributions to retirement savings accounts.
Younger workers are capped at saving $18,500 per year in their 401(k) and $5,500 in their IRAs for 2018.
However, older workers can save an additional $6,000 in a 401(k) and $1,000 in an IRA. (Source if you choose to use stat: Motley Fool)
If you’re serious about retiring, optimizing those savings is the way to go.
Age 65 - 67
This next milestone depends on the year you were born.
We’re talking about Full Retirement Age for Social Security benefits.
Many people think of age 65 as full retirement age, which it was for many years.
However, Full Retirement Age has been pushed back, and you may not hit it until age 66 or 67.
I have a link to help you figure out your full retirement age on my website, srsplans.com
You can file for Social Security as early as age 62, but your benefit will be permanently reduced by as much as 25%.
There is a big bonus for delaying your claim beyond your Full Retirement Age: your benefit will grow by as much as 8% each year until age 70.
There is no benefit to waiting past age 70 to file.
Age 70 1/2
At age 70 1/2, you are required to start taking distributions from your 401(k) or IRA.
These are called Required Minimum Distributions, or RMDs.
Based on the IRS’s life expectancy tables, you can calculate how much you’ll need to withdraw at age 70 1/2 and each year beyond that.
Make sure you have a plan for RMDs, because if you miss one, you could get hit with a steep penalty - 50% of the money you were supposed to withdraw. (Source if you choose to use fact: IRS)
RMDs do not apply to Roth IRAs or other Roth accounts.