22 Jan

Retirement Planning: A How to Guide

retirement planning

There are a lot of myths and misconceptions when it comes to retirement planning. Many people think it’s too difficult to comprehend or that they are too old to start saving now and will have to play catch up. We’re here to debunk some of these common misconceptions and simplify the way you see retirement planning with a 2-step how to guide.

Step 1: Determine How Much You Will Need

The first step in planning for retirement is determining how much money you will need to do live the post-retirement life you desire. When you retire, you will no longer have the consistent income you have been used to for the past few decades, so having a “nest egg” is very important, as that is where your main funds will stem from.

So how much will you need? This varies from person to person and completely depends on what you see your lifestyle looking like. For example, if you are passionate about traveling, you will need to keep in mind the costs associated with this lifestyle and plan accordingly. Another aspect to keep in mind is your health. While it is impossible to predict your future health, you can still plan for what may come. It is always better to be on the safe side and keep some extra funds aside, in the unfortunate case that something arises.

A good rule of thumb to follow when planning what retirement funds you will need, is to expect to require about 70% of your annual pre-retirement income, depending upon what your expected lifestyle will be like. If you want to live more lavishly, planning for more than 70% is probably the way to go. There is no need to decide now, but it’s best to keep this idea in the back of your mind.

Step 2: Determine Where and How You Will Invest

Now that you have an idea of how much you will need, how are you going to go about funding it? This is where IRAs and 401(k)s come in. Currently, you can contribute up to $5,500 to a traditional or Roth IRA each year and up to $18,000 to a 401(k). You can contribute to both every year, but many people tend to choose one or the other. The main difference between the options is that 401(k) and traditional IRA contributions go in tax-free but then get taxed as income once used during retirement, whereas Roth IRA contributions are taxed before you put them in and withdrawals are not taxed later on. Decide which option is right for you and try to put as many funds as you can afford into them as soon as you can. The sooner you get funds into retirement accounts, the longer they have to accrue interest – which means more money for you down the road.

If we’re being honest, the hardest part about saving for retirement is committing to putting away the funds and not being able to use them today. We promise, it will all be worth it in the long run when you can rest easy and relax after all is said and done. Need more convincing? Talk to one of our certified financial planners and start planning for your future!

18 Oct

Planning for Retirement Now

Planning for Retirement Now

No matter what age you are, the time to start planning for retirement is now. If you have no idea where to start, or just want to review your current plan, we’re here to help. By following these few pieces of advice, you can take your retirement savings plan up a notch and start seeing the real difference that saving early can make.

Contribute to Your 401(k)

Contributing to your 401(k) is the simplest way to start planning for your retirement. Even if it seems impossible when you’re struggling to pay off student debt, pay rent, and just afford to eat, focusing on setting aside a small amount every paycheck and contributing it to your 401(k) can make a huge difference in the long run.

Another benefit, is that most employers offer contribution matches to your 401(k). Meaning the amount that you put in, they will match up to a certain percentage, usually 3%. This is essentially free retirement money, so take full advantage and contribute at least the maximum amount that they will match. You should start contributing to your 401(k) as soon as possible.

Open an Individual Retirement Arrangement (IRA)

There are two types of IRAs, traditional and Roth – both with advantages depending on when you would like your contributions to be taxed. A traditional IRA allows you to contribute up to $5,500 per year and grows, tax-deferred, until retirement. With a Roth IRA, you can contribute the same amount per year, but the money is taxed now instead of when you remove it at retirement. RMLEFCU offers both types of IRAs, so you can pick the account that best suits your retirement savings needs. Learn more about our IRA options here.

Be Wise with Your Investments

The younger you are, the more aggressive you can be with your investments as you can handle the ups and downs of the long-term market. The older you get though, you likely want to start choosing more conservative investment options with less risk. If you know little to nothing about investing, instead of trying to decipher the world of stocks and mutual funds by yourself, it’s wise to enlist the help of a professional. Here at RMLEFCU, we have a great financial planning department that is ready to help you plan for retirement and long-term success.

Plan an Emergency Fund

Now that you’re contributing funds toward your retirement, you may think that you don’t need to save anything else. In the case of an emergency though, you’ll want to have a separate account set up with a decent amount of money that can be used for unexpected expenses instead of putting large expenses on a credit card or, even worse, using retirement savings. By setting up a separate savings account with an ideal amount of about 3 months living expenses saved up, you can maintain peace of mind that you will be able to handle any unfortunate emergency that might come up. Sometimes cars break down and dogs need to visit the vet. RMLEFCU offers both regular and custom savings accounts to help you with your specific savings goals. Check them out and see which is the better option for you.

Give yourself peace of mind by looking at the big picture and planning for retirement sooner rather than later. You’ll thank yourself in the long run and probably not even miss the simple expenses you might have to cut back on today. If you need help getting started planning for retirement and would like to speak with one of our financial advisors, give us a call at (303) 458-6660 or visit our website for more information.

 

 

18 Jan

5 Financial Milestones to Hit in 2017

Financial milestones are goals we aim to achieve. Some should be stressed at certain milestones in our own life. In this vein, we picked five financial goals you may have depending on your current age.

Are you just entering workforce?

Start saving for retirement

If you can stand to, save 10% of your salary. The earlier you start doing this, the more you can take advantage of compound interest. If you’re a woman, chances are you will live longer (sorry boys), so try and factor that into your retirement savings. Although you may be receiving a pension if you joined the force, it might not be enough for you to live on entirely.

You’re in Your Mid-Twenties

Set up an emergency fund

Save to be able to cover all your expenses for 6 months if you’re single, three months if you’re married. Start by adding $100 a month to a separate account. You can set up an automatic withdrawal from your checking account to help build your emergency fund. Read More

07 Dec

Beyond the Pension: Being Honest about Retirement

If you’re reading this, chances are you’re a police officer. Your retirement options are unique and there’s no one size fits all retirement planning for police. However, there are a few harsh realities that you’ll thank yourself for facing now, and not waiting until your retirement date is fast approaching.

Harsh Reality: You MAY find it hard to plan for how to spend your post retirement days.

There are many reasons for this.

  • You have more retirement to plan for since you have option to retire after 20 years of service. Retirement planning for police needs to take this into account!
  • Your job and your fellow officers are unique and your identity is tied to being a police officer. Therefore, while other people can disassociate themselves with their job – your line of work makes that difficult.

Solution: Figure out NOW what you want to do in retirement

  • Remember that we often enjoy doing things we excel at. Meaning, if your post retirement plans include “taking up something” or “exploring xyz” it might be wise to try it out now to see if it will be a short lived experiment.
  • Research of retirees indicates those who are happiest in often answer the question, “What will you do with all that time?” with responses like “giving back” and “discovering a sense of purpose”. Volunteering also helps maintain social interactions we previously had at work.
  • Make a list of how you would fill in an entire week if you weren’t working. What new things would you like to learn about and what new places would you like to see? Where would you like to live? What experiences would you like to have?

Harsh Reality: Your ideas about how to spend time MIGHT NOT align with your spouse’s ideas.

For example, you may want to hit the road in an RV and she or he would rather stay close and spend more time with the grandkids.

Solution: Have honest conversations and find common ground now to avoid disaster later. Spend time, without distractions, to discuss what you each envision for your retirement.

If they ARE ready to hit the road, RMLEFCU offers RV loans!

Harsh reality: Unless you change as easily as a chameleon, your spending habits likely won’t look much different in retirement.

Solution:

  • If your tastes are expensive, have a plan to still bring in money if there is a gap where your savings and spending do not meet.
  • Look at downsizing or moving to a location where the cost of living is more affordable. We have some Colorado suggestions in this blog.
  • You may be able to use your home’s equity to improve your cash flow during retirement. There are a few reasons this could be a viable option for you.

Harsh reality: Not everyone reads the fine print of their pension

Solution: Now, rather than when you’re approaching retirement, is the time to familiarize yourself with the rules, timelines, and options affecting your pension plan. Do not try to read before going to bed. Read them very carefully.

RMLEFCU is Colorado’s only credit union dedicated to police officers and we understand retirement planning for police. For this reason, we have an in house financial planner, Debby Wilson, about your retirement plans. She’s been working with our members for 18 years and her expertise is invaluable.

17 Feb

When is it ok to tap into your IRA?

Ninety six percent of the time, it is wise to adopt an out of sight out of mind mindset when it comes to your retirement accounts. But this article is about the other 4%. When is it ok to withdraw money from your IRA? When does it make more sense than borrowing? How can you avoid being penalized?

First, there are two types of IRAs. The first is a traditional IRA, where you are taxed when you take out the money in retirement. The second kind, a Roth IRA, taxes you on the front end but doesn’t hit you with any taxes when you make your withdraw the money in retirement.

The good news: withdrawals are fair game and penalty free after your 59 ½ birthday, no matter which IRA you choose.

Unfortunately, if you withdraw money from a traditional IRA or Roth IRA before you turn 59 ½, you must pay a 10% tax penalty.

There are exceptions to this rule:

Higher Education: If you pay educational expenses for

  • yourself
  • your spouse; or
  • you or your spouse’s child, foster child, adopted child, or descendant of any of them.

Educational expenses include: tuition, fees, books, supplies, and equipment required for enrollment. To get into the nitty-pic for 2.17 bloggritty, see the chart at the bottom of this link.

This is not limited to a 2 or 4 year degree program but includes any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program, essentially all accredited public, nonprofit, and proprietary (privately owned profit-making) post-secondary institutions.

Home:

You can withdraw up to $10,000 of IRA funds toward the purchase of your first home. If you’re married, and you and your spouse are first-time buyers, you each can pull from retirement accounts, giving you $20,000 in residential cash.

Better news: You qualify as a “first-time homebuyer” as long as you (or your spouse) didn’t own a principal residence at any time during the previous 2 years.

Read More

22 Jan

Retirement: WHAT are you going to do with your time and WHERE are you going to do it?

rmlefcu blog picPerhaps you are counting down the days until your retirement with feverish excitement or you feel heart palpitations because you’re not quite sure what this period of life holds for you.

We’ll explore how retirees WANT to spend their time, how they ACTUALLY spend it and some great places in Colorado for people 65+ to make their home.

How we envision retirement: U.S. News and World Report have studied this topic extensively and in an article titled “5 Ideal Ways to Spend Your Retirement” they enumerate wish lists for retirees. Respondents included the following desires, including but not limited to: spending more time with family, pursuing a long held passion, taking more time for your personal interests (think hobbies) and doing activities you already know you enjoy.

How we actually spend retirement: Sleeping, reading, watching TV, home improvement projects, shopping, and working.

Quite the dichotomy wouldn’t you agree? Read More