Charleston Retirement Property

Personal savings has been boosted to an all-time high this decade. Due to the financial crisis, more people are moving their money into savings. Government data shows that we have reduced our debt and cut our spending.

So where do you go from here? How do you start rebuilding? Financial advisers suggest putting 10% to 20% of your income into savings and retirement.

Studies conducted by Harvard University estimate that about 10% of Americans save too much, while 30% have a healthy savings plan. This leaves 60% of us who maintain poor saving habits.

Here’s a plan to help you out with saving throughout the various stages of life:

When you’re starting out

Saving money from a first-job salary is tough, but once you get in the habit, it will pay huge dividends. By transferring a little money to your savings from each paycheck, you will accumulate an emergency fund right away. If you have lots of high-cost credit cards, you’ll want to start paying those off.

After you’ve worked on those two areas, you can start thinking about retirement. It may seem impractical to start saving for retirement when you’re still young and starting out, but growth is exponential, and time is on your side. 401(k) contributions offer a tax break, and some employers offer matching contributions.

Ultimately you want to contribute at least 10% of your pay toward retirement. If you cannot afford this, at least make an effort to take full advantage of your employer’s contribution match, usually found in the form of a percentage of your pay.

Your next priority is to start building your other savings and reserves. These accounts give you options. It is money that allows you to buy a car and make a down payment on a house, or gives you the flexibility to do the things you really want to do.

When you have a family

At this point you’ll want to start thinking about a college-savings plan for your young kids. This will give you the opportunity to save for many years.

Again, you should be tending to your cash fund and retirement savings first, but you’ll want to consider at least a small contribution to a 529 plan, which grows tax-free.

College is expensive, but try not to get overwhelmed: It doesn’t have to be fully funded before your child leaves high school. If you’re also paying down a mortgage, that’s a form of savings too.

When the kids leave home

When the college account is cleaned out, people in their 50s and 60s should focus on building up their retirement savings, aiming to contribute the maximum allowed, up to $16,500 annually—plus $5,500 in catch-up contributions each year—plus whatever they can save outside those accounts.

Empty-nesters may also want to consider replacing that college account with one for long-term care, which covers home health aides or nursing-home care. If a family’s assets are more than, say, $300,000 and less than $1 million to $2 million, long-term care insurance, while costly, may make sense.

When you retire

After retirement, your accounts may need a little rearranging. Funds needed for the next five years or so should be in cash or short-term investments so they won’t be subject to stock-market fluctuations.

Starting a vacation account is also important if you plan on doing any retirement traveling. Many retirees make travel a top priority.

Funds you won’t need for five to 10 years should be treated as medium-term savings, while funds over 20 years are long-term savings.

This blog is meant to act as a reference. Please consult your personal financial advisor about your financial accounts.