Time to Check Your Benefits: Work with a Professional on a Pre-Retirement Financial Wellness Assessment

Investments

With so many decisions to make this time of year about your employee benefits, it’s an opportune moment to think more broadly about your overall financial wellness too. This may seem like a daunting task, but fortunately you’re not alone. A financial professional is armed with the experience and expertise to help you make these important decisions (more on this later). So, while you’re working with that person to review health plans and options for flexible spending accounts as open enrollment deadlines loom, take time to think about your longer-term goals, including your retirement savings plan.

There’s no single best time to begin plotting your path to retirement, but the prevailing wisdom is the sooner the better. Especially when there’s economic uncertainty, like there is now amid the ongoing coronavirus pandemic, it’s in your best interest to balance short-term and long-term financial goals and to develop a plan for your eventual exit from the workforce.

Whether you’re well on your way toward your retirement savings goals or just getting started, there are some tried-and-true steps for setting yourself up for a bright financial future.

Seek professional guidance. If you’re like most people, you know about the importance of saving for retirement but less about the ins and outs of the planning process or where to put your money. In fact, most Americans nearing or entering retirement are not steeped in all the options and advantages for retirement savings, according to the latest Retirement Income Literacy Survey by the American College of Financial Services. If there are any up sides to the lockdowns we’ve experienced in recent months, it’s that people have dedicated more time and attention to evaluate their financial needs and have looked for advice. According to the survey, conducted earlier this year, nearly 6 in 10 respondents relied on financial professionals to help them set goals and devise strategies for their retirement savings. Working with a professional who understands the risks and benefits of all your investment options can help demystify the process, ease your anxiety and provide you with a better informed and successful plan. You might start with one of the  regular retirement planning sessions provided in your area for free or low cost, and delve into the array of programming and tools that are easily accessible online. That can help you find a financial professional that fits your needs and preferences.

Set a goal and weigh your savings options. The most effective way to kick off your effort is to figure out how much you will need to live comfortably and then begin investing your money in one of the retirement plan options available to you. When estimating your goal, you and your financial professional will need to determine when you will retire and estimate what your expenses will be. After adjusting for income you expect from Social Security and other sources you will have an idea of how much you will need to save yourself.

Find out what plans are available through your employer and how to take full advantage of any tax benefits and matching contributions they offer. (If your employer matches your contributions—essentially free money toward your retirement–strive to contribute up to the maximum, or more.) You can also explore individual retirement accounts, or IRAs, or other long-term investments.

Save and save some more. It’s easy to dream about retirement, but if you intend to make those dreams a reality, start setting aside money now. If you have been saving for some time, make sure you are on track toward your end goal and weigh your ability to contribute even more. As you progress through your career, and your life, make sure to reassess your financial position and match your savings capacity with your goal. Try to increase your contributions as your financial circumstances allow, ideally by 1 percent each year.

Build your endurance. The old adage, “It’s a marathon, not a sprint,” may sound cliché, but going the distance into a retirement that is financially secure will require planning and endurance. As you set your retirement goals, consider your current financial fitness and the discipline and actions it will take to take to help you get to the finish line within your ideal timeframe. Getting there does not happen overnight.

We’ve seen some evidence of that commitment during the pandemic. The CARES Act, the federal stimulus bill in response to the pandemic, gives more flexibility for individuals to take distributions or loans from their retirement plans without the usual penalties. Dipping into that savings can be tempting and understandable for anyone who has suffered an economic setback recently. But while many clients have requested the option to access their funds per the CARES Act rules, very few have taken full advantage since the law took effect in late March. It seems the peace of mind in knowing they can access their funds as needed has allowed them to consider the benefits of staying the course as much as possible. That trend seems to match to what’s happening elsewhere too. In the aforementioned survey only 4% of respondents reported decreasing the amount they are saving because of the recent economic downturn, and more than 90 percent said they are moderately to extremely well prepared to weather the crisis. That’s the power of planning well.

Think about your overall financial wellness. Since you’re already focusing your energy on open enrollment decisions and retirement plans, why not examine other important financial considerations? We’ve seen more people looking to tackle financial decisions they had been avoiding, but that have taken on renewed importance in 2020. The pandemic has caused many people to pause and consider their overall financial stability and areas that need more attention. Now’s a good time, for example, to consider if you should invest in a life insurance policy or a plan for long-term care in your twilight years. Plan out other potential big investments you want to make, such as for your children’s college education or a long-term health savings plan. Covering all your bases now will increase the odds that you will grow your retirement account sufficiently to pay not just for the basics, but to support any activities you want to pursue after you leave the workforce, such as travel or charitable donations.

Reflect back and think ahead. It’s important to check back on your plan on a regular basis and determine if you are on track toward your goals. As the year wraps up, it’s a good time to check in with your financial professional and reflect on your successes in maintaining your savings discipline. Together you can consider the lessons that best inform your planning in the year ahead.

For most of us, the retirement finish line is too far in the distance to visualize clearly. But as we gather more knowledge and tools and maintain the right pace and discipline, we can improve our odds of finishing strong.

By Jon Anderson and Kaci Skidgel

Jon Anderson is Head of Retirement at Cetera Financial Group in San Diego.

Kaci Skidgel is President of Retirement Plans at Summit Financial Group in Dallas.

Jon Anderson is not affiliated with Cetera Advisor Networks LLC.