I've been thinking about this topic quite a bit recently and a post in another thread drove me to ask. Is there a recommended timetable for preparing for retirement? Not just for the person who's 5 years away but all the way back to someone just starting out. As someone who is right in the middle of the tunnel but can already see the light shining from the other end, I can recommend advice to the younger crowd but I still wonder when the switch happens from just focusing on saving to actually looking forward to what my financial picture at the start of retirement might look like through Monte Carlo analysis, etc.
For those just starting out, the focus is simple: save. Pay off debt, build an emergency fund, and get at least the employer match. This is also the perfect stage to educate yourself so you are prepared to take full advantage of all your tax advantaged account options and taxable as income grows. I will highlight one additional thing here which is think about the benefits of contributing to a Roth. While you may not like paying taxes now, depending on your career, you may very well be in the lowest tax bracket of your entire life. I definitely underestimated my income growth and wish I had put more into a Roth in my first 5 years.
The next phase is where I'm at now. 15 years into a career and hopefully another 10-15 years to go before I retire early. I'm probably ahead to the curve because I have a well paying job in a LCOL area and did a really good job at saving/investing. At this stage, your investment returns are a significant part (if not a large majority) of your yearly portfolio gains. You can run analysis and build Excel spreadsheets to get a picture of what your retirement might look like but I feel like there are so many unknowns that detailed planning may not be worthwhile. This could be the last stage where assuming an investment growth rate of XX% is valid since your time horizon is still sufficiently large.
The next phase is what I'm most interested in hearing everyone else's recommendations for. When do you start planning the details? I'm thinking of things like Roth conversions, location and amount of "safe" assets if you retire years before claiming SS, when to claim SS, what account/accounts you are going to begin drawing from, etc. Is feels like this probably occurs in the 3-5 year range before retirement and also would be the right time to either find a software to help model things and/or find an advisor to help. Has anyone found benefit in detailed planning farther out from retirement? A couple situations I can think of are 1) your plan is too conservative and you could be retiring before your planned date, or 2) you are laid off in that 5 year period prior to a planned retirement.
Once in retirement, it seems like you are just checking in with the software/advisor to verify you're still on track. You would still be looking ahead at RMD's and planning possible Roth conversions to control future taxes.
Sorry for the lengthy post but I'm really just interested in getting others opinions. I'd like to hear from people at all stages of this journey and maybe this post will be found by a few new college grads and give them some things to think about.
For those just starting out, the focus is simple: save. Pay off debt, build an emergency fund, and get at least the employer match. This is also the perfect stage to educate yourself so you are prepared to take full advantage of all your tax advantaged account options and taxable as income grows. I will highlight one additional thing here which is think about the benefits of contributing to a Roth. While you may not like paying taxes now, depending on your career, you may very well be in the lowest tax bracket of your entire life. I definitely underestimated my income growth and wish I had put more into a Roth in my first 5 years.
The next phase is where I'm at now. 15 years into a career and hopefully another 10-15 years to go before I retire early. I'm probably ahead to the curve because I have a well paying job in a LCOL area and did a really good job at saving/investing. At this stage, your investment returns are a significant part (if not a large majority) of your yearly portfolio gains. You can run analysis and build Excel spreadsheets to get a picture of what your retirement might look like but I feel like there are so many unknowns that detailed planning may not be worthwhile. This could be the last stage where assuming an investment growth rate of XX% is valid since your time horizon is still sufficiently large.
The next phase is what I'm most interested in hearing everyone else's recommendations for. When do you start planning the details? I'm thinking of things like Roth conversions, location and amount of "safe" assets if you retire years before claiming SS, when to claim SS, what account/accounts you are going to begin drawing from, etc. Is feels like this probably occurs in the 3-5 year range before retirement and also would be the right time to either find a software to help model things and/or find an advisor to help. Has anyone found benefit in detailed planning farther out from retirement? A couple situations I can think of are 1) your plan is too conservative and you could be retiring before your planned date, or 2) you are laid off in that 5 year period prior to a planned retirement.
Once in retirement, it seems like you are just checking in with the software/advisor to verify you're still on track. You would still be looking ahead at RMD's and planning possible Roth conversions to control future taxes.
Sorry for the lengthy post but I'm really just interested in getting others opinions. I'd like to hear from people at all stages of this journey and maybe this post will be found by a few new college grads and give them some things to think about.
Statistics: Posted by kappy — Sun Jul 28, 2024 6:27 pm — Replies 2 — Views 422