Black Enterprise spoke with Kevin Chadwick, managing director of Northwestern Mutual in Austin, Texas, for some 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 something 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.
- Assess long-term care needs.
- In your 50s
- Develop concrete retirement plans.
- When and where do you want to retire?
- Those age 50 and over are able to contribute more to retirement accounts. Determine the maximum retirement contribution amount for your age group.
- Estimate retirement expenses.
- In your 60s and beyond
- Coordinate pension / government benefits with savings to build a retirement paycheck.
- Optimize social security (annuities).
- Consider paying off mortgage or other debts.
B.E.: What are some retirement pitfalls and how can you avoid them?
Chadwick: The only mistake people make when addressing financial planning for retirement 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. A trained professional can help develop a financial roadmap that will guide you toward your goals.
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: It’s important to look at a 401(k) as only one channel for retirement savings. Supplementing a retirement plan by considering long-term care or disability needs will help balance short- and long-term financial goals. You may also 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.