Ten Retirement Planning Tips

Ten Retirement Planning Tips

Many households are considering their financial future this time of year and making planning decisions that will ultimately impact retirement. Follow recent coverage on important resources and mistakes to avoid when planning for retirement.

Many Americans households have virtually no retirement savings and many rely exclusively on Social Security. This shortfall is especially critical for people who are just a few years away from retirement. Over 45 percent of all working-age households — or more than 39 million — have no retirement assets1. Cultural and demographic shifts have contributed to this crisis:

  • Retirement often used to mean counting on a company pension, but now it often means counting on your own savings. Many people in their 40s and 50s are caught in this transition.
  • Additionally, a retirement “nest egg” needs to last longer than ever before.

Here are ten retirement planning tips to help you achieve retirement peace of mind from Jean Setzfand, AARP Senior Vice President of Programs:

  1. Start saving today. The earlier you start, the longer you have to save and invest, and the less you need to save each month. AARP and the Ad Council developed a new interactive online resource, AceYourRetirement.org that will provide you with customized action items after you respond to some simple questions.
  2. Save more, if you are getting a late start. Find ways to free up more money to save from AARP’s latest list of 99 great ways to save, and get a handle on credit card debt. Make a payment plan and stick to it, then dedicate those monthly payments to saving once you’re paid up.
  3. Use your 401(k) or similar retirement savings plan at work, and save as much as you can through it. You may get an employer match to boot – try to save at least as much as your employer match. Consider a target date fund for your investments, since they offer a mix of assets that adjust based on your expected retirement date. And, if you don’t have access to workplace 401(k) or retirement plan, open an IRA through a bank or other financial institution. Sock away as much as you can, up to IRS limits and consider target date funds.
  4. Increase your contribution to your 401(k) or IRA, every time you get a raise. And while it may be tempting to spend your tax refund or annual bonus, try treating yourself to something small and use the rest toward your retirement goal.
  5. Take advantage of “catch-up contributions” of an extra $1,000 in IRAs and an extra $6,000 in 401(k)s if you are age 50 or older.
  6. Know your goal. There are many free tools online, including AARP’s retirement calculator, which can help you define a specific retirement savings goal.
  7. Work as long as possible — even part-time gigs in retirement. While many people will not be able to work longer, it’s an important consideration for those who don’t have enough savings or a pension to rely on. Working longer gives you more time to save and invest, and less time to fund in retirement.
  8. Understand that the average annual Social Security benefit is a little less than $17,000 — so saving and investing is very important. If you are able to, consider delaying your benefit, which grows 8% a year between your full retirement age and age 70.
  9. Consider affordability and livability when thinking about where to retire. You might even consider settling down internationally, in a country where couples can live comfortably on as little as $1,500 a month. To find your community’s livability score (“livability index”) and resources to proactively make your community more livable visit, aarp.org/livable.
  10. Consider seeking help from a financial professional. For people who want help from a financial advisor, AARP has just launched a free online tips tool called Interview an Advisor that walks the user through questions to ask an advisor before hiring one. We developed it with the North American Securities Administrators Association. The tool functions like an app and is accessible on smartphones, tablets and computers.

Visit aarp.org/money for more on saving, investing and taxes.

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  1. Source: NIRS analysis of 2015 Survey of Consumer Finance

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We Trust States to Promote College Savings. Why Not Retirement Savings?

We Trust States to Promote College Savings. Why Not Retirement Savings?

One of the most popular ways to save for higher education is through a savings or prepaid tuition plan known as a Section 529 qualified tuition program, or 529 plan. Currently 49 states and the District of Columbia offer 529 plans. Thirty-three states give a state tax break to parents, grandparents or friends who contribute to a 529 account.

Through these plans, the funds are managed by private-sector investors. This professional management, combined with a simple enrollment process, has spurred the growth of the 529 industry from less than $2.5 billion in college savings in the 1990s to more than $253 billion today.

Following the success of college savings plans, states are now taking the lead to expand retirement savings options. Some 30 states are considering creating retirement savings plans for small-business employees whose employers do not offer one. Five states have newly enacted laws to require employee contributions to the state plan to be run by a private investment manager, just like 529 plans. Yet given the success and bipartisan support of state college savings plans, it is puzzling that some in Congress are skeptical about the prospect of similar state efforts in the retirement savings arena.

As was the case with the 529 model, states or the independent entities they establish to run the retirement program have a fiduciary duty to protect plan participants. While each state has the flexibility to customize its 529 plan, the plans all adhere to a strong standard of consumer protections. These existing standards and procedures are a sound precedent for state-facilitated retirement savings programs.

While state-facilitated retirement saving plans are still in their infancy, the solid track record of state-facilitated college savings plans should reassure savers and policymakers alike that consumers’ investments will be managed responsibly. For more about how 529 plans serve as a model for state-facilitated retirement programs, see this policy brief from the Georgetown Center for Retirement Initiatives.


Catherine Harvey is a policy research senior analyst at the AARP Public Policy Institute, where she works on savings policy, with a focus on improving retirement security for millions of Americans whose employers do not offer a retirement plan. Prior to joining AARP, Catherine managed the economic policy project at the National Council of La Raza—the largest national Latino civil rights and advocacy organization in the U.S.

Catherine Harvey is a policy research senior analyst at the AARP Public Policy Institute, where she works on savings policy, with a focus on improving retirement security for millions of Americans whose employers do not offer a retirement plan.

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