By Kaci Skidgel, Registered Representative, Summit
Personal finance is usually incredibly important to most people, yet not always closely managed. By thoughtfully and proactively managing personal finances, an individual can impact or change the trajectory of many aspects of his or her life. From budgeting and saving to retirement plans and investments, taking action to organize your finances will most likely result in increased flexibility and freedom down the road. Summit is happy to provide a few personal finance tips that could change the way you think about money and help get your finances in a place to better serve your future.
A vital part of managing your personal finances is understanding the importance of contributing to your company or organization’s retirement plan. If your place of employment offers a 401k, 403b or 457 plan, make sure to take full advantage of any employer contributions or matching programs and contribute at least as much as the employer matches. We like to call this “free money” that shouldn’t be passed up. It is recommended for individuals to consider increasing the contribution amount each year by at least 1 percent in order to steadily build on retirement savings, while not necessarily feeling the increase as much in daily life.
When it comes to saving, the goal might change throughout different stages of life. Most financial planners suggest for individuals in their 20s to save 6 to 10 percent of their salary or income as they develop their career paths and begin to outline lifelong goals, while those in their 30s are encouraged to save 10 to 15 percent. As you get closer to retirement age, it’s recommended that individuals in their 40s save 15 percent or more in order to adequately plan for the future. Don’t stop reading; we know saving can be challenging. However, with the right advice and knowledge as well as a little discipline, it can be done and will most likely change your future. Most people suggest they don’t have an extra 10 percent of their annual salary to set aside for retirement, but most financial advisors would suggest to start somewhere, no matter how small, and increase the savings amount gradually over time. If you start by saving 5 percent, then increase by 1 percent annually, it will make a difference in the long run. When you retire, the bulk of your assets are made up of what you personally set aside. Therefore, retirement is not necessarily an age or a specific date, but simply the point in time when a person feels they have adequate funds to live a comfortable life.
Keep in mind, retirement can come with many unexpected expenses such as health care. Fidelity Investments estimates a 65-year-old couple retiring in 2013 would need $240,000 to cover future medical costs. That doesn’t include the high cost of long-term care. Because people are now living longer, and more medical and technological advancements exist, we often see that only those who have proactively planned for retirement can actually do so. It’s never too early to start planning!
I will leave you with a helpful analogy. Many people spend hours on the internet researching their next trip or family vacation. For example, someone might spend anywhere between three to six hours booking flights, reviewing hotels or resorts, looking at photos, learning about tours available in that area and so on. However, when starting a new job with a new company, most people only spend 20 to 30 minutes completing forms necessary to enroll in a retirement plan. Most individuals will make a quick selection and hardly ever change investments or the amount contributed for years. We believe you should actively plan for retirement just like you plan for vacation! Find a trustworthy and credible financial advisory partner, such as Summit, who can walk alongside you and help make important decisions that have lifelong impacts.
Kaci Skidgel is the executive vice president of corporate retirement plans for Summit and oversees group retirement planning and individual wealth management.
DISCLOSURE: Securities and advisory services offered through Registered Representatives of Cetera Advisor Networks LLC, member FINRA/SPIC. Cetera is under separate ownership from any other named entity. 1350 S. Boulder Avenue, Suite 300, Tulsa, OK 74119