The Center for Retirement Research at Boston College found that at-risk households constitute 53% of American households that have not saved enough for retirement.
Black Enterprise spoke with Kevin Chadwick, managing director of Northwestern Mutual in Austin, Texas, for tips on smart retirement planning.
Black Enterprise: What should be your financial focus during each of the major life milestones?
Kevin Chadwick: Getting to retirement is no longer the end goal—it’s a turning point onto a new road. It’s important to know the different milestones of your life and what you can do to keep future goals on track:
In your 20s: Manage debt, start a three-month emergency fund, set up a budget, invest regularly in a 401(k), set money aside for a home purchase, and consider life and disability insurance.
In your 30s and 40s: Consider getting life and disability insurance if you’re married or have children, balance college savings for kids versus retirement, continue building emergency fund to six months, and assess long-term care needs.
In your 50s : Develop concrete retirement plans, decide when and where you want to retire, determine the maximum retirement contribution amount for your age group, and estimate retirement expenses.
In your 60s and beyond: Coordinate pension or government benefits with savings to build a retirement paycheck, optimize Social Security (annuities), and consider paying off your mortgage or other outstanding debts.
BE: What are some retirement pitfalls and how can you avoid them?
Chadwick: The biggest mistake people make is a lack of planning. By taking the lead and asking the tough questions early, you can develop a financial strategy that can help you reach your financial goals. Consider the following steps to help get you on track:
Plan early: At any age, it’s a good idea to meet with a financial adviser to discuss your plans and goals for life.
Be consistent: By investing early and regularly in your retirement you are better trained to stick with it.
Stay the course: Be disciplined in your retirement investment approach.
B.E.: How can you maximize retirement accounts and contributions?
Chadwick: You may want to consider maxing out your retirement accounts each year by contributing enough to receive the highest number of matching funds possible. Additionally, increasing contribution amounts by as little as 1% can go a long way toward securing your retirement.