Where does your retirement plan stand? Although this is a phase that looms large in life, many people fail to set aside the money they will need to fund a healthy and happy retirement. Others who’ve saved diligently over time may have been hit hard by the stock market declines of the last couple of years, finding that their nest egg has declined sharply in value.
If you’re not sure what your next best step might be, the New Jersey Society of Certified Public Accountants (NJSCPA) offers this advice for anyone dealing with the new realities of retirement:
It’s Still Smart to Save
Even if your retirement portfolio took a beating in the stock market last year, don’t give up and stop contributing to your plan altogether. You will still need to pay for your expenses in retirement, and it’s smart to have more than just Social Security to cover your costs. If you’ve been burned in the markets and are reluctant to dive in again, consider investments that are least subject to market volatility and less likely to decline in value. If you’re uncertain about the best choices, speak to a trusted business adviser, like your CPA, about your best investment options. But don’t stop saving now or you’re sure to regret it later.
Assess Your Situation
The news has been full of stories of people whose retirements have been negatively affected by market volatility, but don’t assume you’re in the same boat. Instead, make a careful analysis of your financial situation to see where you stand. Do you know if your retirement portfolio will still cover your income needs in retirement? The CPA profession’s 360 Degrees of Financial Literacy program offers free resources to help you answer that question. On the program’s website, www.360financialliteracy.org, you’ll find tools to assist you in evaluating how much money you’ll need in retirement and closing gaps in your retirement income. Once you understand a little more about your future expenses, you can make better savings and investment decisions today.
Consider Ways to Increase Your Nest Egg
At what age do you plan to retire? Obviously, the longer you work, the more money you’ll be able to set aside for your retirement account. And, of course, by continuing on the job you can delay when you begin withdrawing from your retirement savings, which means there will be more waiting for you when you do quit working. Your retirement age will also affect your Social Security benefits.
Say you were born in 1954, which means that your full retirement age for Social Security is 66. If you were eligible to receive a $1,000 monthly benefit by retiring at age 66, that benefit would be cut to $750 if you retired at age 62. Of course, you do begin receiving the benefits sooner, so the total you get will average out over time. (You can learn more on the Social Security Administration website at www.socialsecurity.gov.) Given these variables, the best plan is to consider your individual and family circumstances and review the benefits you will receive at different ages before you make your decision.
Consult Your CPA
Having trouble calculating your retirement needs and creating a reasonable savings plan? Your CPA can help. Ask him or her about all the financial questions facing you and your family. If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to www.findacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.
For more information on various personal financial matters, visit the NJSCPA’s public service website at www.MoneyMattersNJ.com. While visiting, you can subscribe to Your Money Matters, the NJSCPA’s free, monthly email newsletter to receive valuable personal financial planning advice throughout the year.
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