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Retirement Planning: How to Get Started

| May 29, 2019
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Retirement is typically one of everyone’s top financial goals. It may be the furthest out, but any good financial plan starts with calculating how much money you’ll need during your retirement years. Many financial professionals believe you’ll need about 80 percent of your peak pre-retirement income to maintain your current lifestyle in retirement.

If your peak income is $100,000, then you may need $80,000 or more each year.  Multiply that figure by your expected years in retirement and that’s your target. Given today’s life expectancies, you could be nearing the $1.5–$2 million range. Don’t let those numbers scare you. Everyone is different.

Envision the Retirement You Want

Do you want to travel? Own a second home? Leave a legacy to your family, charity or alma mater? Or maybe you just want to live a simple lifestyle with the goal being to cover your basic expenses. Now’s your time to think through the world of possibilities, because the sooner you start planning —and saving —the better able you will be to reach your retirement savings goal.

Time Is Your Friend When Saving for Retirement

Setting aside even a small amount each month can add up over time. One effective strategy is to use traditional retirement vehicles, such as an employer-sponsored 401(k) or Individual Retirement Account (IRA), and set up automatic contributions. While each of these types of accounts has unique rules, all offer tax benefits that can add up over the long-term. Even if nearing retirement, it’s not too late. If you are 50 or older, “catch-up contributions” help pre-retirees stash even more money into their 401(k) or IRA.

How Should You Allocate Your Money?

How you decide to allocate the money you've accumulated —and the goal-related products you choose —are probably the most critical factors when it comes to creating a retirement plan. As mentioned, there are IRAs for retirement goals, as well as guaranteed lifetime income products, but depending on your life stage you may want to consider other solutions as well. Maybe that means permanent life insurance to help protect your family’s financial security and to use as an effective estate planning tool.

Diversification Helps Balance Risk

Diversification can be summed up in one phrase: Don’t put all of your eggs in one basket. Regardless of what types of retirement solutions you choose, don't bet your retirement nest egg on just one. The types of products you select will vary depending on several factors, including your risk tolerance and retirement time horizon. These two factors work hand in hand. The more years you have left until retirement, the higher your risk tolerance may be.

When it’s time to determine the products and financial strategy that’s best for you, you may want to consult with a financial professional. In the meantime, make sure you have a clear vision for your goals so you’ll be prepared to plan your financial future.

Provided by Karen Melo Ticas, a financial advisor with Baystate Financial, courtesy of Massachusetts Mutual Life Insurance Company (MassMutual).

© 2018 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001

Securities, investment advisory and financial planning services are offered through qualified registered representatives of MML Investors Services, LLC, Member SIPC. Planning for Good® and the puzzle heart logo are registered trademarks. FY1097 - CRN202109-237210 

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