The short answer is now! If you are already asking yourself questions about preparing for your financial future, it’s time to start planning!
Planning for your retirement does not need to be complicated, and you can get started by simply identifying your goals, reviewing your spending habits, and budgeting.
You can also gain more insight by attending one of our workshops or ½ day seminars.
Review Your Spending
This doesn’t need to be a long process, but take some time to see how you are spending your money. Then ask yourself, what percentage of your income is spent on food, clothing, entertainment, rent, debt, bills, etc.? You may be surprised to see where your money is going every month. Next, consider tracking your spending habits for another month…you may find saving money a little easier than you think.
What are your lifetime goals? How will you achieve them? Most likely, the answer to the second question will involve some sort of financial commitment. For example, if your goal is homeownership, you’ll probably need a loan or a savings strategy to achieve it. Being aware of these goals and the cost associated with them will help you make a reasonable and realistic plan.
Decrease Your Debt
Debt can have a negative impact on retirement. That is why it is important to have a plan on how to reduce or pay off your debt before you retire. Just as you reviewed your spending, take some time to review your debt. See how much you owe and how long it will take to pay it off. Credit card debt can be particularly detrimental throughout life, and especially in retirement. You’ll want to avoid establishing and/or break any bad credit card habits so that your retirement is not undermined by financial insecurity.
Make a Plan for Financial Success
As you can see, retirement planning and budgeting are closely linked. Any financial problems that you face before retirement will not magically disappear afterward. It is important to make sure you are financially stable prior to retirement to ensure that you’ll have a comfortable and secure retirement.
Once you’ve identified your lifetime goals and evaluated your spending habits, you should create a plan to help you establish your short-term and long-term goals. These plans should be centered on a budget that will help you meet these goals. The 50/30/20 rule is a popular budgeting strategy; 50% of your income should go toward necessities, like housing and bills; 20% should go toward financial goals, like paying off debt or saving for retirement; and 30% of your income should be allocated to luxury, or “want” purchases.
Saving Early Makes a Big Impact
As a TRS member, you started saving for retirement with your first paycheck. If you became a TRS member at a relatively young age, this is great news! Compound interest needs time to have a powerful impact on your retirement savings. As demonstrated by the chart below:
|Age at Start||22 yrs old||32 yrs old||42 yrs old|
|Rate of Return||5%||5%||5%|
|Time Until 60 Years Old||38 yrs||28 yrs||18 yrs|
|Balance at Age 60||$135,842||$73,047||$34,921|
Prepare for the Unexpected
No one wants to think about worst case scenarios, but we all understand that it is important especially when we consider that our finances are rarely just about ourselves. Our financial situations often involve our loved ones. That is why it is important to establish emergency savings and assign beneficiaries before a crisis occurs. Please make sure you create an online TRS account and provide us with your beneficiaries. They could miss out on a lump-sum or monthly benefit payment if you fail to designate them with TRS.