Retirement Planning
Tools and Guidance to Start Now
For some people, retirement seems like a dream that will never come true, and others—ready or not—are almost there.
Make sure you are headed in the right direction and taking steps today that will drive you toward your retirement savings goals.
In addition to educational resources and calculators, Ubiquity Retirement + Savings can introduce you to saving plans such as 401(k) plans and HSAs that make it easy for small businesses and workers to save for a more financially secure and healthy future.
At what age can I retire?
There is no right age to retire. Although you may be eligible to withdraw your 401(k) savings at age 59½ or to collect full Social Security retirement benefits at 67, the right time for you to retire will depend on many things:
- Your projected living expenses in retirement
- Eligibility for Medicare or access to affordable health insurance (if under age 65)
- Your current level of debt
- Your savings, investments, and other assets
- Your health and that of your spouse, if married
- Whether you are ready to stop working or want to start working in a different capacity
- What you want to do in retirement
Some people plan to keep working well into their retirement years to make up for their lack of retirement planning and saving. However, working longer may not be an option. Many current retirees say they had to retire earlier than they planned because of health problems or unforeseen changes within the company they were working for. Taking steps today to prepare for what you want to happen in the future will leave you better prepared to handle surprises along the way.
When should I start saving for retirement?
Every worker should be saving for retirement—even if you think you cannot afford it. Social Security replaces only 40% of income for most people, and that is at today’s level of benefit (which is not guaranteed to continue). By starting to save as early as possible, even small amounts compound over time and add up.
To encourage people to save for retirement, Congress created 401(k) plans and IRAs. These retirement savings plans make it easy to save and provide tax benefits. In your employer’s 401(k) plan, your contributions come right out of your paycheck, which makes saving easy and convenient. If you have an IRA, you are in total control of your account. You determine when and how much of your earned income you want to contribute to your IRA (within limits set by Congress).
Small business retirement plans
Providing a retirement plan is one of the most effective ways business owners can help themselves and their employees save and prepare for retirement.
With a budget-friendly, easy-to-use 401(k) solution from Ubiquity, business owners and employees enjoy substantial benefits:
- Reduced taxable income through pre-tax salary contributions
- Control over when taxes are paid on retirement assets (pre-tax vs. Roth contributions)
- Access to a broad range of investment options
- Tax-deferred growth on investments while in the 401(k) plan
- Option to take a loan from retirement savings
- Ability to move assets to another retirement plan if there is a change in jobs or retirement
- Fewer employees working past their desired retirement date, which can impact morale and increase business costs
Retirement Accounts
It pays to save in a retirement account like a 401(k) plan or an IRA. In addition to helping you build wealth over time, you can choose which tax benefit works for you.
You can wait to pay taxes on the money and investment earnings you save until you take the money out of the retirement account, or you can pay tax now with post-tax Roth contributions and enjoy tax-free income when you retire.
Because these accounts are intended to help you save for retirement, early distributions are discouraged, charging you an additional 10% tax before you reach age 59½. However, you are allowed to move your accounts from one employer’s plan to another or from one IRA to another to maintain flexibility in investment options and plan fees.
How do my retirement savings build wealth over time?
Setting aside even relatively small amounts today and letting your savings grow through your working years is one of the easiest ways to build wealth over time.
If you contribute a portion of your salary in an employer 401(k) plan, consider increasing your savings rate as you earn more or pay off debt. If your 401(k) contributions are taken out of your paychecks before taxes are withheld, it will reduce your taxable income, and you may not even miss these small amounts.
In addition to helping you save consistently over an extended period, most 401(k) plans include employer matching or profit-sharing contributions to boost your savings, which is free money for you.
Plus, as you are working to add to your savings, your savings will be working for you. Through the mathematical phenomenon of compounding interest, your account will grow exponentially as your interest earns interest.
How much should I be saving?
As a part of the retirement planning process, you should consider using a retirement calculator to help estimate how much money you need to save to reach your savings goals and retire comfortably.
These kinds of tools can help you estimate what your 401(k) balance will be at retirement, based on your current 401(k) contribution rate, plus any employer matching dollars. You can even include your expected Social Security benefits and any additional savings you may have to paint a total picture. This is an essential step in determining whether you are on track to reach your goals or you need to save more to get there.
How does Social Security affect my retirement?
Deciding when to apply for Social Security retirement benefits is one of the most important retirement planning decisions you will make.
Many variables can affect your benefits, including how many years you have worked, your marital status, and when you decide to start receiving your benefits. Under the current rules, you can begin as early as age 62, but if you start benefits before your full Social Security retirement age (age 67 for anyone born after 1959), your monthly amount will be reduced.
If you put off receiving benefits until after your full retirement age (up to age 70), your future benefits will be increased. If you are still working when you are receiving benefits, you may have to pay tax on a portion of your benefits. The Social Security Administration website explains these rules and how to apply for benefits. They also provide calculators to help you estimate your benefit amount: www.ssa.gov
How do I balance saving for retirement with paying off debt?
Paying down debt is almost always a good move, and most people try to reduce or eliminate debt before they retire, when possible.
Although it is admirable to pay down debt during your working years, there are other factors to consider if you are thinking of prioritizing debt payments over saving. These are your key accumulation years. If your employer makes a matching contribution to the 401(k) plan and you are not saving enough in your 401(k) to receive the full employer match, you may be giving up free money.
What role do HSAs have in retirement planning?
A health savings account (HSA) is a tax-exempt way you to save and pay for medical expenses if you are covered under a high-deductible health plan.
Your HSA contributions are tax-deductible, your investment earnings grow tax-deferred, and your withdrawals are tax-free if used to pay for qualified medical expenses for yourself or your family — a triple tax benefit.
If you do not need to use up your HSA assets to pay for current year medical expenses, they can stay in your HSA and keep growing tax-deferred. It is not a “use it or lose it” benefit like other medical savings accounts, and it is not tied to your employer. HSAs are becoming an increasingly important part of the retirement planning conversation as HSA account balances continue to build.
Preparing for retirement
As you near what’s typically thought of as retirement age, your vision of retirement should start becoming clearer. Maybe you have decided where you want to live, or you have picked a date to stop working, or you have decided to start a new venture.
Now it is time to prepare for the next step, but don’t stop saving. If you can afford it, this is the time when you can stack up your retirement contributions. Once you have reached age 50, you can make catch-up contributions. In 2024, you are allowed to put in an extra $7,500 into a 401(k) plan and $1,000 into an IRA.
Pay special attention to your investment allocations. This may be a good time to consult with a financial professional to help you create an investment strategy that protects some of the money you have saved but also keeps some invested in a way that it can keep growing. Another step some people take as they approach retirement is to consolidate their retirement savings accounts to simplify management of their assets.
If you have money left in a former employer’s 401(k) plan or multiple IRAs, you may be able to save on administrative fees and possibly investment expenses by pooling your savings into fewer accounts.
Living in retirement
Congratulations, you made it! Now what? It is just as important to continue your retirement planning now as it was before to make sure you have enough money to last throughout your lifetime.
Your investment portfolio should be designed to generate income for you, whether that takes the form of guaranteed payments from an annuity or pension plan or periodic withdrawals from your retirement accounts. A financial advisor can help you determine the best strategy for drawing down your money, including considering all the tax consequences. For example, once you reach age 72, you have to take a minimum amount each year from your retirement accounts—you can’t defer taxes on that money forever.
Retirement services
If you are a small business owner and need a 401(k) plan for yourself and your company, only Ubiquity offers flat-fee plans plus free expert advice.
We will fully customize your 401(k) to meet the specific needs of your small business.
Setting up a 401(k) can be complicated. Only Ubiquity gives small business owners access to 401(k) experts in addition to industry-leading, low, flat fees. Each sales expert has over a decade of experience assisting business owners in 401(k) plan design. Take advantage of this free benefit.
