During this 30-minute webinar, Bill Northey, Senior Investment Director at U.S. Bank Wealth Management, and LeAnn Erenberger, Wealth Management Advisor at U.S. Bancorp Investments, discuss retirement savings strategies to consider in each decade from yours 20s to your 70s.
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Saving for retirement: A decade-by-decade guide
Welcome to our second quarterly webinar, the 2019 U.S. Bank Wealth Management webinar series. I'm Bill Northey, senior investment director for U.S. Bank Wealth Management, and I'll be facilitating today's discussion.
The wealth management professionals at U.S. Bank and U.S. Bancorp Investments are committed to providing timely and useful information for our clients. Throughout 2019, we'll be offering a webinar on a relevant topic, including information on financial strategies you may want to consider as a result.
Today, we're here to talk about retirement saving strategies to consider in each decade from your 20s to your 70s. To give us an idea of who we're talking with today, we're going to post a quick poll on your screen. That should be coming up now.
What decade are you most interested in learning strategies about today, 20s, 30s, 40s, 50s, 60s or 70s?
While you respond to the poll, I have one housekeeping item. In the bottom left of your screen, you'll see a tab labeled, Ask A Question. If you click on that tab, you'll be able to submit any questions you may have.
We'll be addressing questions throughout the presentation. And if we're unable to answer your question during our time together today, we'll follow up with response afterward.
As we wait for the final poll results to come in, let me tell you a little about myself and today's other presenter.
Again, my name is Bill Northey, and I serve as senior investment director for U.S. Bank Wealth Management. As a member of the firm's investment leadership team, my responsibilities include participation in firm wide activities, including investment strategy, asset allocation, policy and due diligence processes. Additionally, I am fortunate to lead an interface with a highly talented group of client-facing investment professionals stretching across our geographic footprint.
It is my pleasure today to be joined by my colleague, LeAnn Erenberger, certified financial planner, senior vice president, and wealth management advice for U.S. bank for investments.
LeAnn works with clients providing investment and financial planning options with US Bancorp Investments.
Let's take a look at the results from poll number one. And it looks like we have a pretty equal distribution of people interested between the decades of 30s through 60s, so 30s, 40s, 50s, and 60s.
As I mentioned, we're here to share retirement saving strategies to consider in each of the decades from your 20s to your 70s. As you age, the steps you take should change. As we go through each decade, if you found you've missed a step, don't worry. These strategies are meant to help guide you as you plan for retirement. But everyone's situation is unique, and our wealth management professionals are available to help you create a custom plan for you.
Let's start with our 20s, and take a look at some of the strategies. LeAnn.
Your 20s are important when it comes to setting yourself up for a financially strong retirement. Why? Time is on your side.
As you age, the steps you take should change. Let's start in your 20s, where you are typically employed in your first job related to your career. There are three key saving strategies to consider, 401(k) traditional IRA and Roth IRA, and preparation.
Also, for many in their 20s, you'll need to balance these options with managing your debt.
Let's take a little closer look at the first item, contributing to your 401(k). Start funding your 401(k), if your provider offers one, especially if your employer matches your contributions. You can contribute up to $19,000 per year in 2019.
But typically you want to consider contributing at least the amount your employer matches. For example, if your company matches 100% of your first 4% of your contribution rate, you should contribute that 4%. Otherwise, you're giving up free money.
While your savings will grow tax deferred, you'll need to decide when you want to pay your taxes. In traditional contributions, you pay your taxes when you withdraw savings during a retirement. With Roth contributions, you make contributions after tax. But when you withdraw your funds, they are tax free.
Now if your employer doesn't offer a 401(k), you should then consider either a traditional IRA or a Roth IRA. And as you get pay raises, use them to bump up your 401(k) or IRA contributions.
So as you transition to your 30s, LeAnn, what are some of the strategies that we should think about in that next 10 years?
At this stage, you've likely established your career, possibly bought property, gotten married, and had children. You're going to be more confident in your earning potential and long-term goals.
There's a handful of strategies you may want to consider, such as paying off debts, setting aside savings for future education expenses, maxing out or boosting your contributions to employer sponsored retirement plans, reviewing fees and expenses associated with different retirement accounts. A wealth management professional can help streamline your portfolio's fee structure.
Consolidate your retirement plans, especially, if you've changed jobs. Check to see if you have the option to roll over any previous employer sponsored retirement plans and pension plans into an IRA to avoid penalties.
Obtain life insurance if someone is dependent on your income.
And finally, complete a financial plan to help you find out if you're on track to meet your financial goals, both short term and long term. For example, if you want to retire at a certain age and income, you can determine how much you need to save to meet that goal.
So for many-- and as we found from our poll—these are the decades that are most interesting.
So once you're in your 40s, retirement is no longer this abstract or distant idea. What are some of the strategies we should think about going from our 30s into the 40s?
During this stage, retirement is no longer an abstract idea. It's becoming more realistic. You're likely in your prime earning years.
So if you've just started saving, do so aggressively. But time is still on your side. Retirement contributions, if you haven't already, consider meeting with a wealth management professional to help ramp up your retirement planning, including maxing out your contributions, which include catch up contributions that individuals age 50 or older can make to their retirement accounts.
It's important to remember that planning for retirement, may just be one goal within a more of a comprehensive financial plan. If you haven't started that comprehensive financial planning process, a wealth management professional can help. They can also help you update a plan that you may have already started.
Caution though, on large purchases. You might be considering, or buying a vacation home, that sports car, or some other large purchase, like a boat. Make sure you factor into your retirement plan when determining that impact of this purchase on your long term savings. You should know that before you purchase that boat, whether or not doing so can impact your ability to retire when you want to.
So thanks, LeAnn, and I'll keep that in mind about the sports car. You brought up a financial plan a couple of times, and for those listening, LeAnn is one of hundreds of wealth management advisors we have at U.S. Bancorp Investments. If you're interested in creating your own financial plan, or getting a second opinion on one you already have, you can find a wealth management advisor near you by following the link in the bottom of your screen that says, Find A Wealth Management Professional.
Before we move on to the strategy it's important in your 50s, let's take a pause and see if there are any questions that we've had on the webinar so far. And as a reminder, in the bottom left of your screen you'll see a tab labeled, Ask A Question. If you click on that tab, you'll be able to submit any questions you may have.
So our first one, you mentioned in our 30s, consider saving for future education expenses. What is the best vehicle to accomplish education savings?
Great question. Before you understand which savings vehicle is right for you, it'll be important to understand the features of the benefits of each of those options in order to help you develop that appropriate plan for your family's financial situation.
Some saving vehicles may include one or more of the following, a 529 savings plan, a Coverdell Education Savings Account, custodial accounts, UGMAs and UTMAs, qualified savings bonds, and traditional and Roth IRAs. So lots of options.
For the sake of time, we're going to move on. If we're unable to answer your question during our time together, we'll be sure to follow up with you directly afterward.
So lay out what strategy should the group be thinking about as we then transition into the 50s.
OK, retirement is just up ahead. When you're in your 50s, it may be a good time to re-evaluate your investment strategy to align your time horizon and feelings towards risk. At age 59 at 59 and a half, you can also start withdrawing from an IRA without penalty if you need to. There are many strategies you may want to consider, but let's focus on just a few of them.
First, your contribution strategies. Take advantage of those catch up contributions. Individuals age 50 and older contribute an extra $1,000 to an IRA and $6,000 extra to a 401(k) annually.
Remaining debt, really you should talk to a wealth management professional about paying off those remaining debts, such as a mortgage, to see if that's a good option for you. A good goal would be to have your debts paid off before you retire.
And also insurance. In your 30s, we talked a little bit about insurance and life insurance. In your 50s, you may want to consider insurance options, such as disability insurance and long term care, to safeguard your retirement nest egg from any unexpected events.
So we actually had a question that has come in that revolves around this, and would it ever make sense to get disability insurance earlier than in the decade of the 50s?
That's a great question, and it really depends on your situation.
In general, if you and your family are reliant on your income stream to maintain your family's lifestyle, you may want to consider having that disability insurance earlier. Oftentimes, employers will offer that as part of your benefits package. Great, and thanks to our audience for the great questions. Keep submitting them please.
So now we make the transition from the 50s into the 60s. What are some of the strategies we should be thinking about at this point?
OK, at this stage, you've had an opportunity to make final adjustments to your portfolio's asset allocation.
You may want to think about ways to keep earning into retirement.
You will also want to review your will and other key documents, like a revoke of a living trust, financial power of attorney, and other health care directives.
If you haven't already created a financial plan, it's not too late. And now would be the best time. So your wealth management professional can help guide you through getting that all set up so you can gain confidence as you approach retirement.
But let's talk a little bit more about those income needs and social security. With social security, you should calculate when you should start drawing those Social Security benefits. The longer you can wait to withdraw them, the higher the monthly amount of payment you'll receive. There are strategies available that can help you maximize your Social Security payments. Proper planning can help you ensure that you don't start your social security too early.
So the last decade that we're going to talk about today is the 70s. So let's talk about some of the strategies that might be appropriate as people move into this decade of the 70s.
At this stage you may be wondering about that IRA and employer sponsored retirement plan you've been growing for the decades. At 70 and a 1/2, you'll need to start taking money out for mandatory withdrawals.
Also, in your 70s, it's a good time to address any budget concerns that you may have to adjust to living into retirement.
If you haven't done so, do an analysis of your portfolio and consider any adjustments that you may need to make to your retirement account so that it can remain funded throughout your retirement. For example, you may want to consider moderating that aggressive positions that you have to maybe a more conservative investment strategy. But don't overdo it. Some investment growth can help offset your draw down of retirement accounts so you can remain funded through your retirement years.
Also, communications of your wishes are very important. And let's talk a little bit about that. Have that important final financial conversation with your family so that they know what your estate planning and your wishes are after you're gone.
If you haven't already, make sure you update your important documents, things like your will, your trust, revocable living trusts, financial power of attorney, health care directives. Check to make sure your beneficiaries are up to date, so that they refresh reflect your wishes accurately.
And finally, review your strategies for charitable giving to ensure that you're maximizing your tax situation on those charitable gifts.
Really good information about the 70s there.
So thank you, LeAnn. To help, we've included a link at the bottom of your screen that says, Saving For Retirement Article, which will bring you to a recap of all the strategies that we've discussed today. You will also notice there is a Handouts tab at the top of your screen.
There we've included a handout titled, Your Retirement, Overcoming Challenges, and Uncovering Strategies. It's one of the many thought leadership papers we publish here at U.S. Bank Wealth Management, and includes additional information to consider as you plan for retirement.
If you have questions about what to do next based on your own individual situation, feel free to reach out to LeAnn, or one of our many wealth management advice colleagues.
They'll be able to help you with any of the strategies we talked about today by offering the objectivity and insights you need as you create your plan and periodically fine tune it over time.
You can click on the Find A Wealth Management Professional if you want to meet with someone near you.
We offer an integrated approach to wealth management that combines banking and investment expertise to help you see your entire financial picture so you can make informed financial decisions both for today and tomorrow. Our approach with financial planning considers your unique goals to create when the journey begins with wealth creation, through your job, and business, and inheritance, and other sources, to grow.
Throughout your life, you'll have with the help of a sound wealth plan based on your risk tolerance, investment goals and time horizon, may help you accumulate assets over time.
Because the future is unpredictable, you should take steps to protect yourself and your family against unexpected events that can put your goals at risk.
And lastly, impact. You can increase the impact of your thoughtful planning by directing your assets toward the people and causes in your life that matter most.
It does look as though we've got a few minutes left here before the end of our time, so I want to take an opportunity to address a few more questions-- some series of questions that have common threads to them.
So it looks like there's a number of questions related to how much income, or what level of income a person will need in retirement.
I can answer that, and it really depends on what your vision for retirement looks like.
But the general rule of thumb that we use, is that you'll need about 70% of your current income in retirement in order to maintain that lifestyle that you have today. Completing that financial plan, and having it reviewed, and updated on a regular basis can help you work towards that retirement you envision. So to plan that out, it would be a good thing to sit down and do that plan.
And it looks like we have another series of questions here that relate to-- particularly related to that body within the poll that people were most interested in.
I'm in my mid 50s, I'm in my mid 40s, and haven't done many of the things that were suggested in the earlier decades. What can I do to make up for lost time? Question we all want to know about.
That's a tough one. Unfortunately, there's no sure fire way to make up for lost time when it comes to savings for retirement. But there are some things you can consider, such as increasing those contribution rates into your retirement accounts, or maybe adjusting your risk tolerance from where you're currently at.
There may be some other strategies that you need to consider based on your specific situation.
I or any of my wealth management advisor colleagues would be happy to take a look at your situation, and see what might make the most sense for you.
Thanks, LeAnn. And then, thank you for our audience for submitting a number of great questions.
We are approaching the end of our time here today, but if you've submitted questions that we didn't get to, we will make sure to follow up with you directly.
So thank you for attending today's webinar. As a valued customer, we'd like to invite you in for a free initial consultation with an experienced wealth management team member near you.
There are several ways you can learn more about how we can help you work toward your financial goals or schedule your free consultation. You can visit usbank.com/wealthmanagement. You can find a wealth management team member near you online at the same site, or by calling 844-233-5836, or by clicking a Find A Wealth Management Professional link at the bottom of your screen.
If you'd like someone to contact you, fill out the information and in the Contact Me tab at the top of your screen, and we'll have a team member reach out to you directly.
Have a great day, and we look forward to seeing you at our next quarterly webinar. Thank you.
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Read Saving for retirement: A complete checklist for a visual, downloadable guide.