Should you use, if you have such options, the in-plan decumulation/retirement-income products or should you use out-of-plan products? But let’s say your plan does offer in-plan decumulation/retirement income products? “Or the decumulation products offered within the 401(k) might not generate enough income given the 401(k) account balance, so the employee must use outside products anyway,” she said. For employees it may be easier to meet their decumulation needs using investment products outside the plan. “The cautionary note is that because of the somewhat looser environment outside alternatives may present more alternatives – but with lots of important details,” Park said. “That said, advisers connected to the plan many times constrain solutions to those associated with the company they work for, limiting alternatives,” he said. He noted, for instance, three popular strategies used by retirees and their advisers to better manage sequence of returns risk: The bucket strategy in which bucket one is supposed to provide income for one to five years; bucket two is for assets that will fund retirement in the next five to 10 years; and bucket three is for assets that will be needed in 10-plus years. “I would suggest they consider engaging a fiduciary, fee adviser — by the hour cost — as an initial sounding board,” said Park. Acknowledging the conflict, Park said working with a certified financial planner would be best. “Insist on paying them by the hour, so as to eliminate conflicts,” he said.
The two most important requirements for major success are: first, being in the right place at the right time, and second, doing something about it. — Ray Kroc, founder of McDonald’s
Mr. Kroc was right. If you want financial security in your future, you need to start saving for retirement at the right time — which is as soon as possible. The more you save, the bigger your withdrawals will be.
Many people are not saving aggressively for their retirement, assuming incorrectly that it’s too early or too late to do so. Let’s take a look at both of those arguments and then review just what you can achieve. (Want to retire early? It might be more within your grasp than you think.)
It’s not too late to be saving for retirement
It’s easy to assume that there’s little point in saving for retirement if it’s only a few years away and you haven’t got much socked away and you’re counting on Social Security. Go ahead and count on some Social Security income in your retirement, but it may be less than you expect, and it probably won’t be enough to support you.
The average monthly Social Security retirement benefit was recently $1,364, which amounts to $16,368 per year. If your earnings have been above average, you’ll collect more than that — up to the maximum monthly Social Security benefit of $2,687 for those retiring at their full retirement age. (That’s about $32,000 for the whole year.) See? It’s not exactly a king’s ransom. You can get a sense of how much to expect from Social Security via the Social Security Administration’s online Retirement Estimator tool, and you can get an even clearer idea of your expected benefits by setting up a my Social Security account with the SSA.
Or maybe you’re counting working as long as you can or holding a part-time job in retirement to supplement your Social Security with additional retirement income? That’s a reasonable plan — except that life’s curveballs may get in the way. According to the 2017 Retirement Confidence Survey, 48% of retirees left the workplace sooner than they had planned to — with 41% of them doing so because of health problems or disability, 26% citing company downsizings or closures, and 14% having to care for a spouse or other family member.
A better plan is to save aggressively beginning right now. Here’s how much you might amass over several relatively brief time periods if your money grows by an annual average of 8%:
Growing at 8% for
$10,000 invested annually
$15,000 invested annually
$20,000 invested annually
See? Even if you’re only five years from…