Marshfield Medical Center Credit Union Shares Benefits of Saving for Retirement Early
Marshfield, WI (OnFocus) This New Year, make it your resolution to take steps toward a healthy financial future by setting aside money for retirement.
“As the old adage goes, the best day to start saving for retirement was yesterday. The second best day to start saving is today,” said David Murphy, VP-Finance & Risk, Marshfield Medical Center Credit Union.
It’s best to start retirement savings while young, but doing so can easily take lower priority when more immediate expenses get in the way, whether that’s student loan payments, the purchase of a first home, or simply raising a family.
However, a dollar set aside today can yield a staggering amount in retirement through the power of compound interest. For example, a 25-year-old who invests $1,000 with an 8 percent return can have $21,724.52 at age 65. In contrast, the same investment at age 45 will return just $4,660.95 by retirement.
Even so, it’s better late than never when it comes to taking that first step.
“Any day you’re able to set aside money for retirement or for the future is a positive step in your financial well-being,” said Murphy. “While your investment hasn’t had time to generate the higher earnings as displayed in the example saving at 25, your $1,000 is still giving you more in retirement than saving nothing at all.”
Once an individual has started the process, the next step is determining how much is necessary to set aside to be adequately prepared for retirement.
“The amount to set aside from each paycheck boils down to how much money you wish to have when you retire,” said Murphy. “Your best bet may be to speak to an investment advisor to walk you through your plans during retirement, to account for unknown expenses, like health care, and to come up with a target balance for your retirement plan at your target retirement date.”
Once an individual has a target balance in mind, they can determine their contribution by factoring in the number of years they plan to work and the anticipated rate of return on savings. An employer offering a 401(k) or 403(b) plan may offer access to planning tools to help with these calculations.
The amount of retirement savings needed depends on the type of lifestyle expected. If retirement conjures up images of travel and spending winters down south, these goals should be factored in. Health expenses and living arrangements should also be kept in mind.
To help save for the future and account for the ever-growing costs of health care, MMCCU offers Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). “Both products have tax advantages tied to them, but you will want to speak with your tax advisor to determine if these accounts can help you lower your tax liability,” said Murphy.
For more information, visit www.mmccu.com or call 715-387-8686.