How to plan for your retirement
Retirement might seem so far away, you don’t spend a lot of time thinking about it. You’re busy enough trying to figure out how to make ends meet today.
Or, retirement seems so close, you don’t want to think about it. You haven’t yet begun to plan, and you’re concerned it might be too late to do anything meaningful.
Either way, there’s good news. Planning for retirement doesn’t have to be hard and no matter when you begin, you will benefit from having a plan.
We can help you get started. Here are tips on creating a plan.
How much money will you need to retire?
Your pension will be an important part of your income in retirement, but it’s just one component. The amount of money you’ll need can vary significantly, based on factors that include:
- The retirement lifestyle you’ll want to lead;
- Your health;
- Whether you’ll carry any debt into retirement;
- Your life expectancy; and
- Other sources of income you’ll have.
How much money will you have when you retire?
You’ll need solid information and good tools to help determine how on track you are.
- The DRS Web site offers a benefit estimator that will help you determine what your pension benefit will be under a variety of different scenarios (for example, different retirement dates), using your actual account data. Just choose “log in to my defined benefit account” from the Account Access menu on our home page. If you haven’t already registered for this service, it takes just a couple of steps to do so.
- The Plan 3 section of the site contains a life expectancy calculator and one that helps you calculate your retirement savings. If you’re a Plan 3 member, you can also access your account data by selecting “log in to my Plan 3” from the Account Access menu.
- The Deferred Compensation Program (DCP) site offers an online calculator that shows your savings growth over time with DCP and how different rates of contribution affect your paycheck. Another calculator helps you see how long your savings could last in retirement.
- The Choose to Save Web site, sponsored by the Employee Benefits Research Institute, contains several tools, including a Test Your Savings Knowledge quiz and a Ballpark E$timate® that assists with estimating the money you’ll have in retirement, including projected Social Security benefits.
If there’s a gap between what you’ll need and what you’ll have…
That’s where your plan comes in. Be sure to keep it flexible enough to adjust for changes in both your professional and personal life. Your plan might include:
- Identifying your retirement lifestyle goals. Will you want to travel the world or stay close to home? Different life choices can mean different financial goals.
- Taking care of your health. The cost of medical care can be one of the largest expenses you incur in retirement. Getting regular checkups now, eating right and exercising can have a big impact on what those costs will be when you retire.
- Paying down debt. Carrying debt lessens the money you have available to save. Paying off your debt while you are still generating a paycheck will not only allow you to save more, but also give you more flexibility in retirement.
- Signing up for DCP or another similar savings vehicle. You can get started with DCP by deferring as little as $30 a month from your paycheck or as much as $1,375 a month in 2009. Here’s an important tip: If you’re age 50 or over, the IRS allows you to save even more.
- Or…increasing your contribution to DCP or another savings vehicle. Making even a small adjustment in the amount you save each month can have a big impact over the long run. Use the calculator on the DCP Web site to see the impact of different contribution amounts.
When your retirement is in sight
If you are within five years of retirement, be sure to sign up for one of our free informational seminars, which are held throughout the state.
If you are within two years of retirement, contact us for a written estimate of your benefits. We will review your account in detail and verify your service credit, compensation and contributions before creating the estimate and sending it to you. Our online retirement planning checklist will help you keep track of what you need to do in the two year period before you retire.
Each goal you set – and each step you take – makes a difference
You’ve already taken an important step by reading this article and considering the information. Next, check out the tools we’ve referenced here and the many others available to you through the Internet or other sources. Use that information to develop your personal plan for retirement.
Then put your plan into action. You may be surprised how much easier it becomes to think about retirement.