Bottom Line Up Front
- You should start planning for retirement as soon as possible. Make sure you take advantage of any match available to you through an employer-sponsored retirement plan and that you have an emergency fund for unexpected expenses.
- If you don't have access to an employer-sponsored retirement plan or you want to further supplement your existing retirement savings/investments, an IRA can help.
- Navy Federal Financial Group advisors can take a comprehensive look at your overall finances and help you build a personalized investment strategy1.
Knowing when and how to start preparing for retirement is an important part of building a secure financial future. We’d like to help you understand what you’ll need, what type of account to open and why a diverse retirement portfolio is important, so you can create a plan that will work best for you. To help you get started, we’ve pulled together the answers to 5 of the most common questions members ask us about retirement planning.
I Have Multiple Savings Needs. Where Should I Focus My Attention?
To help focus your savings, think about focusing on these 3 areas.
- Retirement. Do you have a retirement match available to you with an employer-sponsored retirement plan? If so, try to take full advantage of that. If you aren’t sure, now is a great time to check in with your employer to learn more about their retirement plan.
- Emergency Savings. Do you have an emergency savings fund? If not, start with a small goal—for example, $500—and build from there. What’s important is that you start somewhere. For future planning, consider working toward saving 10-15% of your annual salary (split between both your emergency savings and retirement fund).
- High-Interest Debt. If you're carrying a balance on high-interest debt, then paying off that debt before contributing any more to retirement could be better for you in the long run. Depending on the interest rate, you’ll earn more on your money by paying less interest than you would in the market.
When Should I Start Putting Money Aside for Retirement?
As soon as you can! The more time your money has to grow, the better off you’ll be. If you don’t have an employer-sponsored retirement plan, you can start an Individual Retirement Account (IRA) on your own. Check out the types of IRAs available to you, so you can choose one that will best meet your needs.
What’s an IRA?
An IRA is a tax-advantaged account that allows you to save or invest1 for retirement. There are 2 main types. Here’s a simple explanation on how they differ:
- Traditional IRA: With a traditional IRA, you contribute money that you may be able to deduct from your taxes. Any earnings generated can potentially grow tax-deferred until you withdraw them at retirement.
- Roth IRA: For this type of account, the money you contribute are funds on which you’ve already paid taxes. So, that money can then potentially grow tax-free, and you can withdraw it in retirement tax-free, as long as you meet certain requirements.
How Do I Know How Much to Save for Retirement?
The amount needed for retirement income varies from person to person. We often suggest planning to have 70% to 80% of your pre-retirement income. For instance, if your salary is $80,000 a year before retirement, plan on needing $56,000 to $64,000 a year. Kiplinger published a handy calculator to give you a rough idea of what you’ll need.
What’s Asset Allocation, and Why Is It Important?
In a nutshell, asset allocation is part of a strategy to protect your funds against changes in the stock market1. It’s a way to balance risk by having your money split up among different types of investment options, such as stocks, bonds and cash. That way, if any of your investment types go up or down, having a mix can help balance out that downturn.
Figuring out how to allocate your assets can be tricky. You first need to decide on your risk tolerance1. Are you willing to risk losing some money on some investments in the short term for the chance of a greater financial reward in the future? We can help you decide.
If you’re feeling confident with your savings, try exploring Digital Investor, our simple, powerful online investing tool1. Need more help figuring out your retirement needs? You can talk to a Navy Federal Financial Group advisor. We can help you plot a course, based on your specific financial picture, for a strong financial future.
1Navy Federal Financial Group, LLC (NFFG) is a licensed insurance agency. Non-deposit investments, brokerage and advisory products are only sold through Navy Federal Brokerage Services, LLC (NFBS), a member of FINRA/SIPC and an SEC-registered investment advisory firm. NFBS is a wholly owned subsidiary of NFFG. Insurance products are offered through NFFG and NFBS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Deposit products and related services are provided by NFCU. Financial advisors are employees of NFFG and they are employees and registered representatives of NFBS. NFBS and NFFG are affiliated companies under the common control of NFCU. Call 1-877-221-8108 for further information.