Retirement Guide For Every Age

For most of us, retirement holds dreams of relaxation, travel and time with family. After a career of hustling and putting in long hours of work, caring for family and responsibly following through on commitments, retirement is a time to enjoy life. At least, it will be if you’re properly prepared and have saved enough to comfortably cover your expenses and pay for the things you’re looking forward to.

Many Americans struggle with retirement planning, understandably so. During an economic time that sees many of us working just to make ends meet, saving for decades into the future can seem unreachable. Only two out of three Americans currently believe that they’ll have enough money saved for retirement. By 2050, there will be 88.5 million Americans over the age of 65, which means that they likely won’t be in the workforce and paying into social security — rather, they’ll be drawing from it. This, combined with an overall decline in birth rates over the past 50 years, means that there will be fewer people paying into social security at the same time as there are more retirees eligible for it.

The good news is that saving for retirement doesn’t mean that you need to have a significant lump sum to get started with. This article will outline how you can save to ensure a comfortable retirement, no matter what stage of life you’re in. 

Why should you plan for retirement? 

There are three main reasons (and plenty of other positives) to make sure you tackle your retirement planning ahead of time:

  1. Ensure financial freedom. The last thing you want when you’re supposed to be enjoying your golden years is to be stressing about money and feeling like you can’t do the things you want because you’re on a fixed income. 
  1. Foresee future medical expenses. It’s nearly inevitable that you’ll have medical expenses pop up as a part of the aging process. This can be daunting if you haven’t saved ahead of time so that you can avoid spending money earmarked for essential monthly expenses on medical bills. 
  1. Take advantage of tax benefits.  The US government offers tax breaks to those who invest in retirement savings accounts. Depending on your tax bracket, you’ll have a yearly contribution max that you’ll get a tax incentive for putting money in accounts like a 401k. In addition, the money that you put in these accounts is tax-free until you begin withdrawing from them.

What to consider when planning for retirement 

There are some key things to consider when making a retirement plan. Will you be making home improvements to age-in-place, or will you need aged care? In addition to thinking these things over, it’s important to actually write your plan down so that you can keep track of your goals and give yourself a visual reminder of what you’re working toward. 

  1. When you want to retire. You can begin getting social security payments as early as 62 in the US, but most people don’t officially retire until 67. You can decide on any age for yourself — it’s all about your monthly expenses after you retire and how much time you need to meet those goals before you retire. 
  1. Where you want to live. This is an important factor because the cost of living across the United States varies so much. For example, if you want to retire in Mississippi, your retirement savings goals could be much less than if you want to retire in California. 
  1. Your monthly expenses. This is where you’ll factor in what your lifestyle is and what’s reasonable to expect that you’ll be doing in your retirement years. Beyond your essential monthly expenses like mortgage or rent payments, utilities, and groceries, factor in what you do for entertainment and if you’ll be traveling. For example, if you like to eat out several times a week, that will be a significant factor. While this might seem small while you’re actively earning money, when you’re on a fixed income, these things will matter extensively. 
  1. Which savings plan is better. There are several different retirement savings accounts, and which makes the most sense for you will depend on what your monthly budget will allow you to contribute, who your employer is, and whether you’re self-employed. A certified investment planner can help you decide which account is best for you.
  1. Calculating your net worth. This is important to know in order to plan for things like life insurance costs, paying down debt, and what areas you should be spending more or less in. 

How much money do you really need to retire? 

Retirement experts have varying advice on how much you should have saved for retirement, and there are a few different ways to conceptualize that number. Here are three popular schools of thought on how much money you need to retire:

  1. 80-90% of your pre-retirement income.
  1. 12 times your pre-retirement salary.
  1. Around $1 million

Keep in mind that your retirement savings will go into an investment account, and your bank will use that money to invest, growing over time. This means you don’t have to save every penny of a million dollars, for example, because some of that money will come from a return on your investment.

As a home inspector, what do you need to be able to retire? 

Home inspectors are experts in building codes and are trained to assess the quality and condition of the major systems in your home. Inspectors look at the foundation, structural system, roof, electrical and HVAC and provide the homeowner or potential buyer with a detailed report. While construction experience is valuable, it’s not mandatory as the certification process for home inspectors comes with all the training you’ll need to be able to do this job. There are two licensing bodies for home inspectors, the International Association of Certified Home Inspectors and the American Society of Home Inspectors. In addition, some states require home inspectors to be licensed by their state-specific organizations. In order to become a licensed home inspector, you’ll need to register for a home inspector course that a certified educational institute runs. Much of this coursework can be done online, and there are a large number of these schools to choose from. 

Becoming a home inspector can be a great retirement job since you can choose to work as much or as little as you want. In addition, home inspection careers are highly mobile, so if your retirement goals include wintering in a warmer location, you can work there, too. This flexible career is a wonderful way to transition into retirement while still earning an income. While 80% of people believe they’ll continue to work into their retirement years, only 28% of retirees continue to earn a monthly paycheck. Part of this is likely because finding a flexible retirement job can be challenging. Many people find that being locked into a rigid work schedule in their retirement interferes with the other activities they want to do during this time. 

Regarding what type of retirement planning account would work best for home inspectors, it will largely depend on whether you’re self-employed or working for a home inspection company. If you’re working for yourself, then an IRA, SEP, or Solo 401(k) will be great options — further down, we’ll dive into what each of those plans entails. On the flipside, if you’re working for an employer, you’ll likely want to consider a 401(k). Home inspectors may also want a Traditional or Roth IRA — you can combine both with other retirement savings accounts. 

Types of retirement plans

There are a few categories of investment accounts, and which one is right for you will depend on your work situation and lifestyle. The main types are employer-sponsored retirement plans, pension plans, individual retirement accounts (IRAs), and self-employed retirement plans.

Employer-sponsored retirement plans:

401k plan 

A 401(k) is an employer-sponsored retirement savings plan that has increasingly been taking the place of a traditional pension fund, allowing companies to move the responsibility of retirement savings to their employees.

You contribute to a 401(k) plan each paycheck, either pre-tax or after-tax, depending on the specifics of what your employer offers and your preferences. 

403(b) plan

403(b) retirement savings plans are specific to certain categories of employees, like those who work for public school systems, tax-exempt organizations and churches. There are more types of companies included. You can find the complete list here

457 plan

457 plans allow employees of eligible government offices to defer their income tax on plan contributions up to their contribution limits. You also don’t pay capital gains taxes on the money that your investments make in this type of account, which means you keep more money in your account for retirement. 

Thrift savings plan

A Thrift Savings Plan (TSP) is, essentially, a 401(k) for uniformed military members and other categories of federal employees. 

Pension plans/ Individual Retirement Accounts (IRAs):

Traditional IRA

Having a Traditional IRA means you won’t pay income tax on your contributions when you make them each paycheck, but you will pay income tax when you withdraw in your retirement. 

Roth IRA

Conversely, with a Roth IRA, your contributions are taken on your after-tax income; therefore, you don’t pay tax on withdrawals made during your retirement. 

Self-employed retirement plans: 

Savings Incentive Match Plan for Employers (SIMPLE) IRA

If you’re a sole proprietor of your business, a SIMPLE IRA will allow you to be considered both an employer and employee, meaning that you can contribute to your own IRA plan on both sides. Other retirement savings plans allow for contributions from employers and employees, so the IRS created this plan, so sole proprietors aren’t excluded from that incentive. 

Simplified Employee Pension Plan (SEP)

This type of plan allows employers to contribute to an Individual Retirement Account (IRA). Normally, your IRA, as the name suggests, is yours as an individual to contribute to and doesn’t involve your employer. A SEP allows contributions from both your employer and yourself so you can participate in employer contribution benefits. 

Solo 401k Plan

Another retirement savings option for business owners without employees other than themselves and/or their spouse is a Solo 401(k) plan. This plan has all the same benefits as a regular 401(k) for single-person businesses. 

Using your home and its equity as a retirement asset

Several ways owning a home can help you with your retirement savings and income. If you’re late to the game for savings, you can use a home equity loan to create investment accounts for your retirement. Once you’re in your retirement years, you can downsize your home and use the proceeds from the sale to invest or add to your retirement income. 

Another option is to take out a reverse mortgage. You must be over the age of 62 to qualify for a Home Equity Conversion Mortgage. This type of loan allows you to tap into the value of your home to contribute to your retirement income while still living in your home. 

Retirement planning is essential to secure your financial independence in your golden years. Starting as early as you can and frequently reviewing your plan and upping your contributions whenever possible will mean that you can kick back when you’re retired and enjoy the Jimmy Buffet, Margaritaville lifestyle you’ve been working so hard for (or whatever your retirement dreams look like)!