Retirement Financial Path: When Do You Start?

By Jon L. Ten Haagen

The sooner the better! If you want to try and make your retirement comfortable, you should start saving with your first paycheck. Seriously, the sooner you start the more likely you are to succeed. Time is your friend. It’s time in the market, not timing the market. I like the comment that we like the impatient investor (trader) because they are in and out of their investments with the news media headlines, because they help us patient (long-term investors) investors to succeed.

Financial security and the comfort of knowing you are meeting your long-term investment goals should be important to you. Make a list of your goals and in what time frame you feel you can accomplish them. Basically the best first step is to start. When you accumulate assets (investments) you have the potential to increase their value over time and hopefully get you closer to your financial goal(s). If you do not have a game plan, even with a GPS you will not get there – wherever that is. Make a plan and stat your journey.

I and many financial advisors suggest you consider yourself the first bill you receive each paycheck. Pay yourself (your future) first! When you are first starting out with your first job, you most likely can’t afford to put away 15-20 percent of your pay into investment in a tax-deferred retirement plan. Figure out what you can comfortably afford to put away now. Maybe only 3-5 percent to start at this time. That’s OK for now. Once you are started, plan on increasing your contribution by 1-3 percent each year until you get to your goal of 15% or more.

You should look into your company-qualified plan if one is offered. There are many plans depending on your companies status (401(k), 403b, 457, or if it is your company a SEP, Simple IRA, IRA and or ROTH IRA). Discuss the options with your CFP and or CPA to make sure you make the right choice.

When considering your employer’s plan, research what your investment choices are and the costs of the plan. If the plan has a “match” you must participate, it is a no brainer! The company is adding free found money to your retirement plan based on the amount of income you invest up to a certain percentage. This is free found money. Once you get started determine if it makes sense for you to add more to the company plan or to look at investments outside the plan. The plan may have really good investment choices and, if so, add there, but if the company investment choices do not have good choices look outside and consider an IRA or ROTH IRA where you have more investment choices. Again, talk with your CFP to make sure you qualify to contribute. There are restrictions based on your adjusted gross income. The idea is to get as much of your retirement investments into tax deferred and/or tax advantaged situations.

Think about you and your loved ones. There are many short-term reasons not to invest now – a new car, house or vacation. Focus on your long-term goals. Financial security for you and those you care about protecting and supporting.

I hear many people who are getting near retirement suggest they should become very conservative and put more and more of their retirement assets into safer securities (CDs, T-Bills and bonds). The potential problem with this strategy is that we are living longer and so our money has to work harder to stay ahead of inflation and taxes. Once again, talk with your CFP and other advisors (CPA, insurance agent) to be sure you are doing the right thing for you specific circumstances.

Seriously, stop telling yourself you’ll get to it and start now! Having given financial advice and guidance for over 35 years, I see too few people starting when they should and doing a good job of saving. Starting early is hard enough, but playing catch up is a lot tougher.

Another topic to address is your and your family’s adequate healthcare which we will discuss in another issue.

Please continue to send us your questions about any financial/investment topics you want to know more about. When we get your questions it helps us to know more about the topics that interest you. Thank you to those of you who have written in.