The greatest issue to avoid in retirement planning is outliving your money, according to Coleman. This can happen when people don’t put enough away to get them through retirement years, or when they’re blindsided by an extended care event that drains money rapidly. He estimates that about a third of all people will experience an extended care event at some point in life.
Factors to consider
You’ll need to consider multiple factors when determining your best retirement plan. A professional financial advisor can help guide you through these variables to devise the most appropriate retirement and investment approach for your current income and future financial needs. A few questions to consider when devising a retirement plan include:
- What type of retirement lifestyle do you want?
- What will your retired life look like? (Will you be providing support to a spouse or other dependents? Will you retire in your current home, or do you plan to buy a different or second one?)
- What do you anticipate your monthly overhead to be during retirement?
- Will you need money for travel during retirement?
- At what age do you wish to retire? Is retiring early or by a certain age important to you?
- Over the next few years, do you anticipate taking substantial time off for child care, family needs, travel, sabbatical, health reasons, etc.?
Some of the most common ways to save for retirement include traditional retirement accounts such as a 401(k), 403(b) or simple IRA, which many employers offer as a benefit. Coleman advises taking advantage of any employer matching on retirement savings. “Never leave free money on the table,” he said. Earning a match in contribution funds typically requires a certain percentage of your income to be put aside, usually 3-6%.
Traditional employer-sponsored retirement plans are not the only way to save and plan for retirement. Real estate, and other types of funds or investment accounts are also options. Many of Coleman’s clients set up nonretirement investment accounts, for example, to diversify their assets and to avoid early withdrawal fees or possible tax consequences. Investments should be kept in IRA retirement accounts until after age 59.5, to avoid early withdrawal fees penalties, and taxes. The objective is to have some accounts that are not taxed as ordinary income, as income tax rates may increase over time.
Regardless of where you put your money, “investments are like soap — the more you touch it, the less you’ll have of it,” Coleman said. “Playing the long game when investing is a key to making the most of your retirement funds, no matter where you choose to invest your money.”
Coleman offered a few more general helpful reminders for retirement planning:
- The more you make, the more you should save.
- Optimize any and all employer retirement matching by investing at least the minimum percentage of your income required to earn the employer match for company sponsored retirement plans.
- Time is your greatest asset.
- Diversify the type of accounts where you invest. If possible, don’t rely solely on one 401(k), IRA or a single employer-sponsored retirement plan.
It’s a good idea to consult with a professional financial advisor to guide you through the variables in your finances and goals, as well as the intricacies and nuances of investing and the regulations and rules of various types of plans.
Coleman strongly advises working with a licensed professional — preferably one who is a professional financial planner or financial advisor — to help understand how to maximize your money and create wealth.
A licensed professional “has a legal obligation to operate in the client’s best interest,” Coleman explained, recommending you confirm all professional credentials and qualifications before sharing your financial information.
CEO and founder of ChoiceMutual, Anthony Martin is a licensed insurance agent who also helps people save money and prepare for retirement. Martin summed up his advice for health care professionals with a few key pointers:
Start saving as soon as they have a paying job: Always prioritize building a reliable emergency fund before attempting to save and invest for your retirement.
Start by investing a percentage of your income you feel comfortable with, then increase it to 10-15%: However, people have their own retirement savings goals, so always keep that in mind. People who want to retire early might decide to increase this percentage, especially if they’ve paid off any debt.
Invest in a Health Savings Account, which you can use it for qualified health expenses without paying taxes: Once you turn 65, you can also use it as retirement income for noneligible health expenses — provided you pay taxes on it.
Self-employed nurses can invest as much as $61,000 in a solo 401(k).
Nurses who work at nonprofit hospitals can take advantage of retirement accounts like 403(b) and employee matching.
It’s never too early — nor too late — to start saving for your retirement.
¹Wyatt Coleman, is a financial adviser offering investment advisory and financial planning services through Eagle Strategies LLC, a registered investment adviser and registered representative offering securities through NYLIFE Securities LLC (member FINRA/SIPC), a licensed insurance agency and agent, New York Life Ins. Co., 2600 Network Drive, Suite 130, Frisco, TX 75034; 214-704-6995. Eagle Strategies LLC & NYLIFE Securities LLC are New York Life Companies.
²A Tailored Method LLC is not owned or operated by Eagle Strategies LLC or its affiliates.
³Neither A Tailored Method LLC, its staff, nor NYLIFE Securities LLC, its representatives or affiliates provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.