Retirement Strategies for Today and Tomorrow

On May 24, 2024, a group of nearly 50 people from across the US joined AARP VT State Director, Greg Marchildon, on Zoom for the Retirement Strategies for Today and Tomorrow webinar, which provided general guidance to help people think about retirement planning. Whether you’re single or married, retired or still working, it’s important to start planning for your retirement now and, if married, to plan together. AARP’s Money Map can help.

The first step is to make a thorough and accurate inventory of your current financial status. How much do you and your partner make each month - from all sources? How much do you save each month? What are your current monthly expenses – don’t forget the trips to Starbucks and meals out? Do you have any retirement accounts through your employer or on your own? Compiling this list can feel daunting, especially if you aren’t a numbers person, but it’s really important to be as thorough as possible so that you know exactly what your current lifestyle costs you and how prepared you are for the future. AARP’s budget calculator tool can help.

Once you know what you have, you can start to think about what you’ll need. Before moving on, pause for a few minutes and think about what your retirement looks like. What are you doing? Where are you living? Who are you with? What do you want to do? What’s most important to you? Everyone is different… some people look at retirement as time to slow down and spend time with family and friends or delving into hobbies. For others, it’s time for adventure and travel, filling their bucket with experiences. For still others, it’s their third act and they start a new business or invest their time in a variety of volunteer activities. Your retirement is what you make it – really think about what’s important to you. Once you have that picture in mind, and an accurate accounting of what your current lifestyle costs, you can move on to the planning stage.

To maintain your current lifestyle, it’s estimated that you’ll need 85% of your current income in retirement; for a more moderate lifestyle, 75% of your current income; and for a more extravagant lifestyle, 95% of your current income. AARP provides a free retirement needs calculator that will help you determine the gap between what you currently have and what you’ll need to support your retirement lifestyle. Do you know your projected social security income? [If you haven’t already, creating an account with the Social Security Administration to monitor your earnings is advised.] This is the time when finding a professional financial advisor would be most helpful, since investment strategies could change depending on whether you’re under or over the age of 50. You guessed it – AARP has a guide to help you find the best advisor to meet your needs! Retirement income can vary depending on your age, and the longer you remain in the workforce, the higher your retirement income will likely be, so be sure to review your needs based on different retirement ages.

Once you know the difference between what you have, what you need, and what you’re on target to have at retirement, you can strategize to bridge that gap. Marchildon offered a number of strategies to get you started. Here are a few:

• Strengthen your foundation by:
  
  • Reducing your debt –choose your approach and pay off low-balance (quick satisfaction and momentum) or high-interest debt first (save money faster), and keep reducing from there. Also, remove your credit card information from all online and one-click pay sites to reduce temptation.
    
  • Developing a budget - you can use the AARP tool or go it on your own, as long as you account for all of your current income and expenses.
    
  • Planning for emergencies - It’s advisable to have 4-6 months of your living expenses set aside. Estimates indicate that 67% of Americans can’t cover a $1,000 emergency expense, should one arise.
• Take advantage of any employer-sponsored savings plans (401k, 403b, IRA, etc.). Contribute the maximum allowable to take advantage of employer matches. Never pass up free money!

• If you’re over 50, you can make catch-up contributions to your 401k or 403b – up to $6,500 extra each year.

• Open a non-employer sponsored retirement savings account, like a Roth IRA, and contribute the maximum allowed each year.

• Consider downsizing – do you need your large house or could you be comfortable in a smaller house, condo, or apartment?

• Sign up for Fraud Watch to be sure you don’t get caught up in a financial scam.

The bottom line is, start early, and review often. Once you have a clear picture of where you are and where you want to be, monitor your retirement plan regularly – at least once a year. Be sure that both you and your partner are committed to the plan and are clear about the state of your finances, even if one of you is more involved in financial management than the other. It’s never too late to start planning for the future!

To view a recording of the Retirement Strategies for Today and Tomorrow webinar, use the Zoom link below:
https://aarp-org.zoom.us/rec/share/fVmDB0UcRZtwpJuQ3rV3AJlfxX6w-QFbUQfuHEAfoGnSbVDGfP8AfDoIZUPltnrf.dAUhliCgQKeC3BvJ
Passcode: AARPvt052424!

This article was written by Sharon Ayer, an AARP Vermont volunteer.