Below, we’ll go through five straightforward strategies that can put you on the right track. These strategies aren’t about chasing trends or trying to predict the future. They’re about creating a solid foundation for yourself and your family so that when the time comes, you can step into retirement with peace of mind.

1. Start Saving Early and Stay Consistent

It might sound like common advice, but starting early is the single most effective step toward building a retirement fund. Time is your greatest ally when it comes to growing savings. Here’s why:

• Compound growth works best with time. When your money earns interest, that interest then earns its own interest, and so on. The earlier you start, the more years you give your money to build on itself.
• Even small amounts make a difference. If you can’t save a large portion of your income at first, don’t worry. Saving $100 a month consistently over 30 years has a much larger impact than waiting 15 years and saving $300 a month.
• Consistency beats timing the market. Waiting for the “perfect time” to invest often leaves people sitting on the sidelines. Consistent contributions, even in smaller amounts, matter more than trying to predict when to invest.

A good rule of thumb is to save at least 15% of your income toward retirement if possible. If that feels out of reach right now, start smaller but make a plan to increase the percentage as your income grows.

2. Take Advantage of Retirement Accounts and Employer Contributions

In many countries, retirement accounts come with tax advantages that make saving easier. For example:

• In the United States, accounts like the 401(k) or IRA allow your savings to grow either tax-deferred (you pay taxes later) or tax-free (Roth accounts, where you pay taxes now but not later).
• In other places, pension plans or government-supported savings vehicles provide similar benefits.

The key is to understand what options are available where you live and make the most of them.

One of the most overlooked benefits is employer contributions. Many employers will match part of your contributions to retirement accounts. For instance, if your employer matches up to 5% of your salary, that’s essentially free money you’re leaving on the table if you don’t contribute at least that much.

To put it simply: always take full advantage of employer matches before looking at other investments. It’s one of the easiest and most reliable ways to grow your retirement savings.

3. Manage Debt Before It Manages You

Debt can quietly erode your ability to save for retirement. High-interest debt, like credit cards or personal loans, drains your income and leaves you with less room to contribute toward long-term goals.

Here’s a practical way to handle debt while still keeping your retirement savings on track:

1. List your debts from smallest balance to largest, or from highest interest rate to lowest.
2. Pay more toward one debt while making minimum payments on the others.
3. Once the first debt is paid, roll that payment into the next.

This approach is often called the snowball or avalanche method, depending on whether you focus on balances or interest rates. Both work; the important thing is to stay disciplined.

At the same time, don’t stop saving for retirement altogether while paying off debt. If your employer offers a match, continue contributing at least enough to get the full match. After that, direct extra money toward high-interest debts. Once debts are under control, you can redirect those freed-up payments into retirement accounts.

4. Plan for Healthcare Costs

One expense people often underestimate in retirement is healthcare. Even if you’ve saved well, medical expenses can drain your resources quickly if you haven’t prepared.

Here’s how to plan realistically:

• Understand what coverage you’ll have. In the U.S., Medicare covers many basic needs after age 65, but it doesn’t cover everything. In other countries, public healthcare may cover more, but you’ll still want to account for gaps.
• Consider a Health Savings Account (HSA). If available, HSAs allow you to save pre-tax money for medical costs, and the money can roll over year after year. In retirement, it can be a valuable safety net.
• Factor in long-term care. Assisted living, nursing homes, or in-home care can cost far more than people expect. Insurance or specific savings for this purpose can protect your retirement fund from being drained.

The bottom line: healthcare is not a surprise expense, it’s a certainty. Building it into your plan now avoids stressful choices later.

5. Adjust Your Investments as You Get Closer to Retirement

The way you invest at age 30 should look different from how you invest at age 60. Early on, you can afford to take more risks because you have decades to recover from downturns. But as retirement gets closer, preserving what you’ve built becomes more important.

A simple way to think about it:

• Early career (20s and 30s): Focus on growth investments like stocks. You have time to ride out the ups and downs.
• Mid-career (40s and 50s): Start balancing growth with stability. A mix of stocks and bonds works well.
• Approaching retirement (60s and beyond): Prioritize safety. Shift more toward bonds, dividend-paying stocks, or other steady income sources.

Target-date retirement funds can help if you’re unsure how to manage the shift. These funds automatically adjust the mix of investments as you get closer to retirement age.

The key is to avoid leaving all your money exposed to high-risk assets late in life. Protecting what you’ve saved is just as important as growing it.

6. Build Multiple Income Streams for Retirement

Relying only on one source of retirement income, such as a pension or government benefits, can leave you vulnerable if costs rise or benefits change. Adding extra streams of income gives you flexibility and security. Some common options include:

• Rental income from property investments.
• Dividends from stocks or mutual funds.
• Part-time work or consulting in an area you enjoy.
• Annuities that provide steady payments for life.

The idea isn’t to overcomplicate your finances but to avoid putting all your eggs in one basket. Even a small second income source can help cover expenses like travel, healthcare, or unexpected bills.

7. Protect Your Savings with Insurance and Estate Planning

Retirement planning isn’t just about growing money; it’s also about protecting it. A strong plan includes safeguards against unexpected events.

• Life insurance: Ensures your family is financially supported if something happens to you before or during retirement.
• Long-term care insurance: Helps cover the high costs of extended medical or nursing care.
• Estate planning: Writing a will, assigning beneficiaries, and considering trusts ensures your assets are passed on the way you intend.

These steps may feel uncomfortable to think about, but they prevent unnecessary stress for you and your loved ones later. Protecting your savings is just as important as building them.

Additional Tips to Strengthen Your Retirement Plan

While the five strategies above form the core, here are some additional steps that can make a big difference:

• Set clear goals. Decide what kind of retirement lifestyle you want. Do you want to travel often, stay close to home, or support family? Knowing this helps you set a realistic savings target.
• Track your spending. A simple budget shows where your money goes and makes it easier to redirect funds toward retirement.
• Review your plan yearly. Life changes income, family needs, market conditions, and your plan should adjust to.
• Avoid withdrawing early. Tapping into retirement accounts before retirement not only reduces savings but also triggers taxes and penalties.
• Stay informed but avoid panic. Markets go up and down. Stick with your plan unless your goals or life situation change significantly.

Bringing It All Together

Reaching retirement goals isn’t about finding shortcuts or complex strategies. It’s about consistent, steady action over time. By starting early, using retirement accounts wisely, managing debt, preparing for healthcare costs, and adjusting investments as you age, you’ll put yourself in a strong position for the future.

The peace of mind that comes from knowing you’re on track is worth the effort. Retirement should be a stage of life where you enjoy the results of years of work, not one where you worry about money running out.

The best time to start planning is today. Whether you’re in your 20s or 50s, the steps you take now can make all the difference later. Stay consistent, stay realistic, and your future self will thank you.

References

1. https://www.centralbank.net/learning-center/5-successful-strategies-for-retirement-planning/
2. https://www.investopedia.com/articles/retirement/11/5-steps-to-retirement-plan.asp
3. https://www.hilltopfinance.co.uk/pension-advice/retirement-planning/retirement-financial-planning-tips/
4. https://www.nerdwallet.com/article/investing/retirement-planning-an-introduction
5. https://yieldfinancialplanning.com.au/ebook/top-5-pre-retirement-strategies/
6. https://berkshiremm.com/5-factors-to-consider-5-years-before-retirement/
7. https://www.torowealth.com.au/retirement-planning-for-beginners/

The post Five Straightforward Strategies That Will Help You Reach Your Retirement Goals appeared first on MoneyThumb.

This guide offers a full breakdown of how beginners can get started with retirement savings, step by step. No jargon. No fluff. Just useful, real-world guidance.

Why Saving Early Makes a Big Difference

The single most important factor in retirement saving is time. Starting early, even with a small amount, can make a huge impact thanks to compound growth.

Example:

Let’s say you start saving $150 a month at age 25, and your investments grow at 6% annually. By the time you’re 65, you’ll have approximately $300,000.

If you wait until 35 to start and save the same amount monthly, you'll end up with around $154,000 by age 65. That’s almost half the amount for a 10-year delay.

Even if you can’t afford much, starting with $50–$100 a month builds the habit and lays the foundation for long-term success.

How Much Should You Save? Start With a Goal

There’s no universal figure for everyone. But here’s how to estimate:

1. Consider Your Retirement Age

Most people aim to retire between 60 and 67. The earlier you retire, the more you’ll need saved, since your money has to last longer.

2. Estimate Monthly Spending in Retirement

Use your current monthly expenses as a reference, then subtract expenses that may not exist in retirement (e.g., commuting costs or children’s education). Add new costs, like increased healthcare needs or hobbies.

3. Adjust for Inflation

A dollar today won’t have the same value in 30 years. Assuming a 3% average inflation rate, you’ll need more money in the future to maintain the same lifestyle.

4. Consider Other Income

Will you receive a pension? Social Security? Rental income? Subtract these from your target monthly amount to determine how much your savings must cover.

Example:
You want $4,000/month in today’s dollars. Social Security might cover $1,500. That leaves $2,500/month needed from your savings.

Understand Retirement Accounts

Retirement savings accounts give you tax benefits and help your money grow over time. The options available depend on where you live, but here are the main types in the U.S.

1. 401(k) or 403(b) Plans

• Offered by employers.
• Contributions are taken directly from your paycheck.
• Traditional 401(k): Contributions reduce taxable income now, and taxes are paid in retirement.
• Roth 401(k): Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.
• Many employers offer a matching contribution; take full advantage of it if available.

2. IRA (Individual Retirement Account)

• For individuals without employer-sponsored plans or who want to supplement them.
• Traditional IRA: Tax-deductible contributions (depending on income), taxed on withdrawal.
• Roth IRA: Contributions are not deductible, but earnings and withdrawals are tax-free in retirement.
• Contribution limits apply, and they’re lower than 401(k) limits.

3. SEP IRA / SIMPLE IRA

• Best for self-employed individuals or small business owners.
• Higher contribution limits than traditional IRAs.

Automate Your Savings

One of the best things you can do is automate your savings. Set up direct deposit or automatic transfers to your retirement account. This way, you treat your savings like a regular bill, non-negotiable and consistent.

Benefits of automation:

• Removes the need to decide monthly.
• Reduces the chance of skipping a contribution.
• Helps you stay consistent even when life gets busy.

Even small amounts saved regularly add up over time.

Open a Retirement Account and Start Contributions

Once you understand which account is right for you, open one through your employer or a trusted financial institution. If your employer offers a 401(k), especially with matching contributions, that’s usually the best place to start.

Steps to get started:

1. Contact HR to enroll in your workplace plan.
2. Choose a contribution percentage starts with at least enough to get the full employer match.
3. Select your investment options based on your risk tolerance and timeline.

If you're self-employed or your job doesn’t offer a plan, open an IRA (Roth or Traditional) at a brokerage firm.

Automate Contributions

The easiest way to stick with retirement saving is to automate it. Automatic payroll deductions or recurring transfers from your checking account ensure that you save consistently without having to think about it each month.

Why it works:

• Reduces the temptation to skip months.
• Builds the habit of saving.
• Keeps you on track toward long-term goals.

Even if you start with a small amount, say, $100 per month, it adds up over time. You can always increase the amount later.

Learn the Basics of Investment Growth

Retirement accounts are not just savings accounts. They are investment vehicles. The money you contribute should be invested in a mix of assets stocks, bonds, and possibly other options, so that it can grow over time.

Key investment principles:

• Diversify: Spread your money across different asset types.
• Time Horizon: The younger you are, the more risk you can generally take.
• Low Fees: Choose low-cost index funds or ETFs to avoid losing money to management fees.

Example: A person investing $200/month from age 25 to 65, earning a 7% return, could retire with around $525,000. Wait until 35 to start, and the final amount drops to around $244,000.

Understand Employer Matching

If your job offers matching contributions on a 401(k), that’s essentially free money. For example, if your employer matches 100% of the first 4% you contribute, you should aim to contribute at least that much to take full advantage.

Failing to claim the match is like turning down part of your salary.

Increase Contributions Over Time

Most people don’t start off contributing the maximum. But once you’ve built the habit, try to increase your contribution by 1% each year or every time you get a raise. This gradual increase won’t hurt your budget but will greatly help your future.

How to do it:

• Set reminders for yearly contribution reviews.
• Use automatic increase tools if available through your plan provider.
• Prioritize retirement savings over lifestyle inflation.

Avoid Early Withdrawals

Taking money out of your retirement account early can hurt you in two ways: taxes and penalties. In most cases, withdrawing before age 59½ triggers a 10% penalty on top of regular taxes. More importantly, it derails your long-term growth.

Exceptions may include:

• First-time home purchase (Roth IRA only)
• Certain medical expenses
• Higher education (IRA only)

But even when allowed, early withdrawals should be a last resort.

Track Progress and Adjust as Needed

Retirement planning is not a set-it-and-forget-it process. Life circumstances change. So do income levels, family needs, and market conditions. Review your accounts at least once a year and adjust where necessary.

What to monitor:

• Are you on track to reach your target savings amount?
• Do your investments match your risk tolerance?
• Can you increase your contribution this year?

Use statements, dashboards, and financial planning tools to stay on top of your progress.

Consider Talking to a Financial Advisor

While many people can set up their own retirement plans, working with a professional can help you understand complex tax rules, asset allocation, and income planning. Look for a fiduciary advisor, someone legally required to act in your best interest.

They can help with:

• Creating a customized savings strategy
• Managing risks
• Planning income streams for retirement years

Retirement Savings for Non-Traditional Workers

If you're a freelancer, contractor, or small business owner, you still have excellent retirement saving options.

Options include:

• SEP IRA: Easy to set up and lets you save a percentage of your income.
• Solo 401(k): Ideal for higher-income earners; allows high contribution limits.
• Traditional or Roth IRA: Available regardless of employment type (with income limits for Roth).

Be sure to set up automatic transfers just as a salaried worker would.

Don’t Rely Solely on Social Security

Social Security is designed to supplement, not replace, your retirement income. It may provide 30%–40% of your needed funds, depending on your work history and when you claim benefits. That means your own savings will need to make up the difference.

 Common Mistakes to Avoid

• Waiting too long to start: The earlier you begin, the easier it is.
• Not contributing enough: Aim to increase savings as income rises.
• Ignoring fees: High-cost funds eat into long-term returns.
• Cashing out when changing jobs: Always roll over your 401(k) to a new plan or IRA.

Conclusion: Take the First Step Today

Retirement saving isn’t about how much you know; it’s about getting started and staying consistent. You don’t need a large salary or an advanced understanding of finance. You just need to begin. If you can save even $50 or $100 a month now, that habit will grow over time. The more consistently you apply these principles, the more secure your retirement will be. Keep things simple. Automate what you can, review your progress once a year, and gradually increase your savings. It’s about building peace of mind one step at a time.

References

• https://www.bankrate.com/retirement/retirement-basics/
• https://www.scribd.com/document/478131886/Beginners-Guide-To-Personal-Finance-pdf
• https://www.nerdwallet.com/article/investing/retirement-investments-beginners-guide
• https://www.mysccu.com/learn/how-to-plan-for-retirement
• https://www.holden-partners.co.uk/a-beginners-guide-to-saving-money/
• https://www.investopedia.com/personal-finance-4427760
• https://www.adityabirlacapital.com/abc-of-money/beginners-guide-for-personal-finance
• https://www.thestreet.com/personal-finance/personal-finance-for-beginners
• https://www.m1cu.org/news/articles/the-basics-of-personal-finance-a-beginners-guide-to-financial-literacy
• https://www.investopedia.com/guide-to-financial-literacy-4800530
• https://www.nerdwallet.com/article/finance/personal-finance
• https://vocal.media/trader/money-mastery-the-beginner-s-guide-to-personal-finance-success
• https://www.businessinsider.com/personal-finance/investing/financial-plan

The post A Beginner's Guide to Saving for Retirement appeared first on MoneyThumb.

In this article, I am going to provide you with a comprehensive roadmap to save money for your retirement without any concern with your age or financial situation. From understanding the importance of starting early to exploring investment options and avoiding common pitfalls, this guide will equip you with the knowledge and tools to build a secure financial future.

Why Starting Early is Crucial?

The most significant advantage of early saving is the power of compound interest. Compound interest helps your money grow exponentially over time by earning interest not just on your initial investment but also on the interest that accumulates along the way.

If you start saving $200 per month at age 25, with an average annual return of 7%, you could accumulate around $525,000 by the time you retire at 65. However, if you wait until age 35 to save the same amount, you'd only have around $250,000 by retirement. That's a difference of $275,000 simply because you started 10 years earlier!

This illustrates the power of compound interest—the earlier you start, the more time your money has to grow.

Starting early also gives you more flexibility to recover from financial setbacks, such as market downturns or unexpected expenses. The longer your investment horizon, the more time you have to ride out volatility and benefit from long-term growth.

Step 1: Set Clear Retirement Goals

Before you start saving, it's crucial to define what retirement means for you. Having a clear vision will help you set realistic financial goals and develop a savings strategy that aligns with your lifestyle expectations. Ask yourself:

• At what age will you retire? The sooner you plan to retire, the more money you'll need to save to support yourself for a longer time.
• What lifestyle do I want in retirement? Do you see yourself traveling frequently, pursuing hobbies, or maintaining a simple, low-cost lifestyle?
• How much will I need for basic expenses and personal goals? Think about housing, healthcare, daily expenses, travel, and any financial support you plan to give your family.

A general rule of thumb is to aim for 70–80% of your pre-retirement income to sustain a comfortable lifestyle. However, your needs will depend on factors like healthcare expenses, where you live, and personal goals.

Once you have a financial target in mind, use online retirement calculators to estimate how much you should save each month.

Step 2: Get Benefit of Employer-Sponsored Retirement Plans

If your employer offers a retirement plan, such as a 401(k) or 403(b), take full advantage of it. These plans allow you to contribute pre-tax dollars, reducing your taxable income and helping your savings grow tax-deferred until withdrawal.

Here’s how to maximize your employer-sponsored retirement plan:

1. Get the Full Employer Match: If your employer offers a match on your contributions, take advantage of it. It's essentially free money. For example, if they match 50% of what you contribute up to 6% of your salary, aim to contribute at least 6%.
2. Increase Contributions Over Time: Try to save 10-15% of your income for retirement. If that’s too much right now, start small and increase your contributions as you get raises or bonuses.
3. Choose the Right Investments: Most employer-sponsored plans offer a range of investment options, such as target-date funds, index funds, and mutual funds. Consider your risk tolerance and time horizon when selecting investments.

Step 3: Open an Individual Retirement Account (IRA)

If you don’t have access to an employer-sponsored plan or want to increase your savings, consider opening an Individual Retirement Account (IRA). There are two main types of IRAs:

1. Traditional IRA: In this plan, contributions are tax-deductible, and earnings grow tax-deferred until you get the withdrawal during retirement.
2. Roth IRA: In this plan, contributions are made after the tax deduction, and at the time of withdrawal during retirement, it will be 100% tax-free.

Both IRAs are particularly beneficial for young investors who expect to be in a higher tax bracket during retirement.

For 2024, the annual contribution limit for Individual Retirement Accounts (IRAs) is $7,000, with an additional $1,000 catch-up contribution allowed for individuals aged 50 and older, bringing their limit to $8,000.

Step 4: Diversify Your Investments

Diversification is a key to managing risk and maximizing returns. Instead of putting all your money into one type of investment, spread it across different asset classes, such as stocks, bonds, and real estate.

Here’s a basic guide to asset allocation based on age:

• In Your 20s and 30s: Focus on growth-oriented investments, such as stocks or stock-based mutual funds. Since you have many years before retirement, you can take more risk in your investments. Higher-risk options mean the potential for greater returns over time, which help to grow your savings significantly.
• In your 40s and 50s, gradually shift to a more balanced portfolio by adding bonds and other fixed-income investments.
• In Your 60s and Beyond: At this stage, it's important to prioritize capital preservation by shifting more of your portfolio into safer investments like bonds and cash equivalents. This helps reduce risk and protect your savings as you approach retirement.

Think about working with a financial advisor to develop a personalized investment plan that aligns with your goals and risk tolerance.

Step 5: Automate Your Savings

One of the best ways to stay consistent with your retirement savings is to automate your contributions. Setting up automatic transfers from your paycheck or bank account to your retirement fund becomes your habit, and you have to never think about it.

Automation helps you stay on track by removing the temptation to skip contributions, especially during months when money feels tight. It also takes the stress out of remembering to save, making it easier to build your nest egg steadily over time. Many employers allow you to set up direct deposits into your retirement account, and banks offer automatic transfer options for IRAs and other savings plans.

Step 6: Avoid Common Retirement Saving Mistakes

Even with careful planning, simple mistakes can put your retirement savings at risk. You have to take each step carefully to avoid any scamming activity. Here are some common pitfalls to avoid:

1. Not Saving Enough: Many people underestimate how much they’ll need for retirement. Regularly review your savings progress and adjust your contributions as needed.
2. Cashing Out Retirement Accounts Early: Withdrawing funds from your retirement accounts before age 59½ can result in heavy penalties and taxes, and you miss out on valuable growth opportunities.
3. Ignoring inflation: Over time, inflation erodes the purchasing power of your savings. You have to make sure your investments overtake inflation by including growth-oriented assets in your portfolio.
4. Failing to Rebalance Your Portfolio: Market fluctuations can throw your asset allocation out of balance. Rebalance your portfolio periodically to maintain your desired risk level.

Step 7: Continuously Educate Yourself

The personal finance world is constantly growing, and staying informed is crucial to making smart decisions. Read books, listen to podcasts, and follow reputable financial websites to expand your knowledge.

Some excellent resources include:

• The Simple Path to Wealth by JL Collins
• The Bogleheads’ Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf
• Podcasts like The Dave Ramsey Show and ChooseFI

Step 8: Adjust Your Plan as Life Changes

Life is full of unexpected events, and your retirement plan should be flexible enough to adapt. Major events like a new job, marriage, having children, or unforeseen expenses can impact your financial goals. Regularly reviewing your retirement strategy ensures it stays aligned with your needs. As your income grows, you should increase your contributions, and if you face financial setbacks, adjust accordingly. You may also need to modify your investment strategy based on your risk tolerance over time. Staying informed about new retirement rules and tax benefits can help you maximize your savings. A well-adjusted plan keeps you on track, no matter what life brings.

Final Thoughts

Planning for retirement may feel overwhelming, but with a clear strategy and consistent effort, it’s completely wonderful. The most important step is to start early, make the most of available resources, and stay committed to your goals. Small, steady contributions with time can lead to significant growth, thanks to the power of compound interest.

Retirement planning isn’t just about securing your finances—it’s about giving yourself the freedom to enjoy life on your own terms. You can use it for traveling, pursuing hobbies, or simply having peace of mind. A well-prepared plan guarantees you can retire comfortably. If you take control of your savings today, you will make your life easier.

Sources

1. https://www.investopedia.com/terms/c/compoundinterest.asp
2. https://www.nerdwallet.com/article/investing/retirement-calculator
3. https://www.irs.gov/retirement-plans
4. https://jlcollinsnh.com/
5. https://www.bogleheads.org/wiki/Main_Page
6. https://www.thebalance.com/retirement-planning-4074038
7. https://www.fidelity.com/retirement-planning/overview
8. https://investor.vanguard.com/retirement
9. https://smartasset.com/retirement

The post A Roadmap to Saving for Retirement: You Are Never Too Young to Begin appeared first on MoneyThumb.

As an accountant, you most likely have clients who are looking toward retirement soon. They are headed toward dynamic lifestyle changes after years of working. As their accountant, you can be of invaluable assistance by offering income tax planning, information on healthcare coverage, along with your experience with retired clients' record keeping and possibly even housing options. Your client will be very interested to learn how much retirement is going to cost and how you can help them minimize those costs. Here are strategies to consider with your pre-retiree clients:

Basic tips for clients thinking about retirement

Whether they’re months or decades from retirement, some clients are bound to seek your advice on getting prepared. Since you already know their retirement contributions, you have direct insight into their financial and retirement situation. While you may not want to take on a true financial planner role, you can always offer these basic tips:

Start early 

Notice that your younger clients haven’t begun retirement contributions? Let them know about the benefits of compound interest over time and encourage them to start as soon as possible.

Consider paying off debts first

As beneficial as it is to start saving early, it might make more sense for your clients to pay off high-interest debts first. The earned interest from their retirement savings could be far less than the money they’d save by paying off debt early.

Contribute 10-15% or more

Most experts agree that contributing 10-15% of your monthly income is a great place to start if you hope to maintain your current lifestyle in retirement. However, clients who are older and haven’t contributed enough may need to play catch up and contribute more to meet their retirement goals. In this case, they may need to see a financial planner for more targeted advice.

Match employer contributions

Even if contributing 10% is out of reach right now, encourage your clients to at least contribute the amount their employer is willing to match. They’re missing out on free money if they don’t!

Learn the most common types of retirement accounts

Encourage your clients to stick to low-risk investments for retirements like 401ks and IRAs. Mutual funds can be another great addition to a savings portfolio since they are diversified and therefore less risky than investing in a single stock.

If your clients are after more specific investment advice, you may want to refer them to a certified financial planner (CFP) who can help them set up accounts and savings goals. (The CFP is  likely to repay the referral when their clients need tax help!) Some tax preparers even add financial planning to their services to diversify their income and make money year-round.

Before collecting Social Security: Help your clients lessen their tax brackets in retirement by timing ROTH IRA conversions or traditional IRA withdrawals to fully use lower tax brackets each year from ages 60 to 71.

When transitioning from employer-sponsored health coverage to retirement health coverage: Your clients must consider COBRA along with Medicare and Medicare supplemental policies so they can avoid gaps in coverage. Help them do this by offering them education and guidance. Also, understand that Medicare supplemental policies do not consider COBRA as creditable coverage, so make sure you consult with a qualified professional that specializes in Medicare and Medicare supplemental policies whenever your clients have COBRA or are continuing work with an employer or union coverage after age 65.

The post How to Help Your Accounting Client Prepare for Retirement appeared first on MoneyThumb.

The average retirement age, however, has not increased nearly as dramatically, with the majority of workers retiring between the ages of 62-65. So that means a retired person could be looking at financing their lives for another 20-30 years after they stop working.

Another challenge new to the 21st century is that whereas traditionally defined benefit pension plans promised to pay workers a lifetime pension, those have largely disappeared in the private sector. What this means for anyone planning to retire is that you must be responsible for creating your own personal savings and retirement plan.

However, if investing in the stock market is part of your retirement plan, there is another added challenge. There have been four major stock market crashes since 1987, and financial experts foresee more in the future. To add insult to injury we must consider the rising cost of health care in the US and the extreme rise in the cost of health insurance.

As a result of all these challenges, most older American workers haven’t saved enough money to retire full time at age 65 under their pre-retirement standard of living, as measured by the amount of retirement income that’s realistic to expect from their savings and Social Security. This is the sobering conclusion of a recent report by the Stanford Center on Longevity (SCL).

Still, in spite of the gloomy financial outlook for US retirees, this article from Forbes states that it is still, 'a good time to be aging." There’s plenty of scientific and medical research that informs us how to live long, healthy lives. People are eating more healthy, making sure they get plenty of exercise, and just generally taking better care of their bodies. Social research shows what makes us happy and gives us meaning, particularly in our later years. There are many robust, efficient financial products and services, as well as nonprofit organizations like AARP, Area Agencies on Aging, and local nonprofit service groups that advocate for seniors and provide helpful resources. And these resources are at our fingertips because of the internet.

Your new “retirement job” is to face up to the challenges the Rules of Thumb blog from MoneyThumb has discussed in this post and to decide how to make the most of the gift of these extra years of life. There’s a good chance you will live a long time, so it only makes sense to take steps to live long and comfortably.

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Sooner or later, everyone retires, even accountants. To help you understand ways to make sure your retirement is a successful one, we would like to share these 5 ways to avoid failing at retirement. This information is courtesy of an article at Market Watch by the financial advisor, Greg Sullivan.

5 Ways to Avoid Failing at Retirement

While you are still working, your finances are like a river. A stream of money is coming in. You funnel cash from the river as you need it, but more is always flowing in. Once you’ve retired, your wealth is a lake — there’s no substantial inflow, and you cannot afford to fail at protecting that lake

1. Keep an eye on your spending

This seems like a no-brainer, but runaway spending is a blunder people continue to make. While conventional wisdom dictates that you need 80% of your preretirement income to maintain your lifestyle in your post-work years, recent research from the Employee Benefit Research Institute shows that nearly half of households spent more in the first two years of retirement than they had while working.

When you have a healthy income flowing in, it is easy to develop lavish spending habits. Exotic vacations, meals out, frequent shopping trips, and other treats are among the ways people reward themselves for a long week’s work. In retirement, you probably have similar desires and more time — more time to travel, more time to shop, more time to redecorate your home or pursue potentially expensive hobbies like golf, scuba diving, or boating. But in retirement, your income is a fraction of what it once was, and it’s easy to overspend assets. Pay attention to guidelines for a sustainable withdrawal rate based on your portfolio — a common rate is 4% to 5% annually, but the recommendation will vary depending on your individual situation.

2. Cut the kids off

Adult children who fail to become financially independent can be a serious drain on your retirement assets. Stepping in to help a child who has a crisis is fine, but too often the “crisis” becomes a permanent condition, with grown kids coming to their parents for money again and again, sometimes seriously jeopardizing their parents’ future financial independence.

If your kids have benefited from your generosity all their lives and into adulthood, they probably take your contributions for granted and may not understand how much that is adding up to. If that is the case, it’s incumbent on you to make them aware and to gradually wean them off your assistance. Think of yourself as a safety net for your kids rather than as a permanent source of help. Getting your adult children off the payroll not only protects your retirement assets, it also, in the long run, strengthens their ability to manage their own lives.

3. Plan wisely in the event of a divorce

While divorce rates overall have begun to decline, they’ve risen among Americans over 50 years of age, with approximately 25% of the divorces today occurring among couples who are 50-plus. And though a couple may have enough in retirement assets to support them comfortably, a split of the assets — paired with the fact that those same assets must now support two households rather than one — can strain the budget and change the realities of the individuals’ lifestyle.

It’s understandable that couples don’t want to talk about divorce. They probably don’t want to talk about it with their friends or families, and they definitely don’t want to talk about it with a financial adviser, so there can be a tendency to put off dealing with the practical details. But there are steps to make sure both you and your spouse (and any dependent children you may have) are well taken care of, and the sooner those plans are begun, the smoother the process will be. Because the dissolution of a marriage is so emotional, tensions can run high in even the most cordial of circumstances — you should step back and look at your financial options calmly and in a way that will lead you to more thoughtful decisions.

4. Beware of vacation home fantasies

In peak earning years, many people dream of a second home, a getaway where their families can relax on weekends and during summer vacations, or a future retirement place, where they can pursue their hobbies and enjoy life. It seems like a solid investment, but all too often that vacation home becomes a serious burden. You may not realize how expensive maintaining two homes will be once your income drops to postretirement levels.

Ironically, the gap can be most dramatic for the affluent. For one thing, people with higher incomes tend to buy more expensive homes and to be more lavish in their spending, so the drop in income is more precipitous. And if a recession should hit and/or the real-estate market takes a dive, houses in vacation spots are particularly vulnerable — it can be difficult to sell them without taking a significant loss. Before you buy that vacation property, do a clear-eyed analysis that considers both the initial investment and ongoing costs to see what you can afford — and then stick to that plan.

Amazingly, under-living your wealth can also lead to a retirement fail. Retirement is not only the end of one phase of life, it’s the beginning of a chapter in which you have time to explore new things. But people sometimes fail to live fully in their retirement years and truly enjoy what they have built. If you’re a cautious spender, old habits die hard and irrational fear of the future can take hold; you may remain in full-on save and conserve mode even if you could easily afford to indulge your interests in whatever way you choose.

Look candidly at your retirement “lake” and then dip out a bucket that you can spend without worrying you’ll run dry. Let your “fun bucket” set your mind at ease, and learn to take pleasure in what you’ve worked so hard to earn.

Greg Sullivan, CPA, CFP, is president and chief executive of Sullivan Bruyette Speros & Blayney, is the author of “Retirement Fail: The 9 Reasons People Flunk Post-Work Life and How to Ace Your Own.”

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If you count yourself among this group of Americans, are you really sure your retirement plan is ready for anything?  You should be proud of the fact that your retirement savings account, work-related retirement plan, and stocks or IRAs--if you have them, and you really should--are steadily growing.

However, we all know how life works. John Lennon said it best, "Life is what happens to you while you are making plans." Barring unseen disaster or other circumstances beyond your control, if you keep on the path of savings you have designed for yourself, retirement is going to be a beautiful, financially secure event in your life.

Steps to Assure Your Retirement Plan is Ready for Anything

Even though you have a solid financial plan in place for retirement, it is important to give your retirement strategy a stress test of sorts while things are still going along at an even keel. To help you do this, the Rules of Thumb blog from MoneyThumb would like to offer our cherished readers a short guide to help you make sure your retirement plan is ready for anything. Here they are:

1. Take stock of where you stand now--Pull together the current balances of any money you have geared toward retirement. Include your 401(k)s, IRAs, other company savings plans, and savings earmarked for retirement that you have. Then calculate the percentage of your gross annual income that you save in a 401(k) or other workplace plans (including any company matching funds) and note the dollar amount that you stash in investments outside your workplace plan.

2. Plug this information into a retirement calculator--A good retirement calculator employees Monte Carlo-type simulations to allow for the variability in investment returns. Among the free online calculators are, T. Rowe Price’s Retirement Income Calculator and Fidelity’s Retirement Quick Check. You will also want to include an estimate of the age you intend to retire, your projected Social Security benefit, and the percentage of your salary you need to maintain an acceptable standard of living in retirement. As for the percentage of pre-retirement income you’ll require, anywhere between 70% to 90% is a credible estimate. You can get your projected Social Security benefit by going to Social Security’s Retirement Estimator.

3. Follow through and periodically reassess--Retirement planning isn’t something you do once and then forget about it.You’ll need to periodically assess your progress and make adjustments to stay on track. When you’re within 10 years of your anticipated retirement date, if you find that you have not accumulated enough resources to allow you to retire on schedule and lead the lifestyle you’d like, then it is time to reassess your retirement plan. You may find the need to work for a few more years, take a part-time job after you retire, or cutting back on the type of lifestyle you lead.

We at MoneyThumb and the Rules of Thumb blog really want our readers to be able to retire with ease when the time comes. By following the above steps, you can get much closer to making this happen.

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Out of simple curiosity, we decided to find out where this phrase, "pay yourself first" originated. Come to find out, the saying was coined by George S. Clason in his book Richest Man in Babylon. The phrase caught on like wildfire and is used by many personal finance experts, blogs, books.

Now let us explain why we here at MoneyThumb believe that consumers should always follow this sage advice, "Pay Yourself First, and how to go about doing this while still getting the bills paid and living a comfortable life.

Why You Should Follow the Sage Advice, "Pay Yourself First"

To pay yourself first means simply that before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account. The first bill you pay each month should be to yourself. This habit, developed early, can help you build a beautiful nest egg.

Why pay yourself first?

For the majority of young people, saving may seem impossible. You have rent, a car payment, and groceries: the basics. You think of saving money, but there’s just none left at the end of the month. And that’s the problem: Most people save what’s left over — left over after bills and after discretionary spending.

The problem is that if you don't develop the saving habit now, there are always going to be reasons to delay. Here are three reasons to start saving now instead of waiting until next year (or the year after):

You’re prioritizing saving

When you pay yourself first, you’re mentally establishing saving as a priority. You’re telling yourself that you are more important than the electric company or the landlord. Building savings is a powerful motivator — it’s empowering.

You’re developing good financial habits

Paying yourself first encourages sound financial habits. Most people spend their money in the following order: bills, fun, saving. Unsurprisingly, there’s usually little left over to put in the bank. But if you bump saving to the front — saving, bills, fun — you’re able to set the money aside before you rationalize reasons to spend it.

You’re prepared for money emergencies

By paying yourself first, you’re building a cash buffer with real-world applications. Regular steady contributions are an excellent way to build a nest egg. You can use the money to deal with emergencies. You can use it to purchase a house. You can use it to save for retirement. Paying yourself first gives you freedom — it opens a world of opportunity.

I’ve never met anyone who does not wish they had started saving earlier. Nobody tells themselves, “Saving was a mistake.” No matter what your age, begin saving now. And if you already save, consider boosting how much you set aside each month.

How to pay yourself first

The best way to develop a saving a habit is to make the process as painless as possible. Make it automatic. Make it invisible. If you arrange to have the money taken from your paycheck before you receive it, you’ll never know it’s missing.

Part of your savings plan will probably include retirement, but you should also save for intermediate goals too, such as buying a house, paying for a honeymoon, or purchasing a new car. Here are three easy ways to begin doing this yourself:

• If your employer offers a retirement plan — such as a 401(k) — enroll as soon as possible, especially if the company matches your contributions. Matched contributions are like free money.
• Starting a Roth IRA is one of the smartest moves a young adult can make. These accounts allow your investments to grow tax-free. Because of the extraordinary power of compound interest(and compound returns), regular investments in a Roth IRA from an early age can lead to enormous future wealth.
• Open a high interest savings account. Set up automatic transfers into this account, either directly from your paycheck or from your regular bank account. Treat these transfers like you’d treat any other financial obligation. This should be your first and most important bill every month.

We certainly hope this article has been of great help to our personal finance and consumer audience. Please share with your friends and business acquaintances on your social media channels so that they too can learn to "Pay Yourself First."

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It is about that time again. Time for us to talk more about personal finance, and especially retirement. MoneyThumb, in striving to offer our readers the most comprehensive information on all things finance, would like today to share a post on retirement from Financial Samurai. This post is VERY in-depth, and is listed by Financial Samurai in their newsletter and one of the best posts on retirement from their site. Read and learn how you can retire early and never have to work again.

How to Retire Early and Never Have to Work Again.

There’s nothing better than being free to do whatever you want. However, unless you’re born with a multi-million dollar trust fund, you’ll unfortunately have to work for your freedom.

You can follow my savings guide to increase your chances of a wonderful retirement by 50-65. But, what if you want to retire earlier? Say at the age of 40 or 45? You’re in luck, because I have a very simple, yet effective plan for you. This is something I’ve been following for the past 13 years to allow myself the option to retire as early as 35-4-. I think you’ll like the option as well!

What’s important is recognizing your inner frugality, your Herculean discipline, the government’s generosity, and your enormous hustle. There’s nothing better than taking action with your finances and seeing results!

EXAMPLES OF PEOPLE WHO’VE RETIRED EARLY

Realize that it’s an absolute fallacy you must work until 60-65 to be able to retire. It’s up to you whether you want to have the freedom to do whatever you want. You just have to make some sacrifices.

I will assume that you enter the work force at age 22 after college. All you have to do is work for 18 consecutive years and save 55% of your after tax profits without fail. At age 40, mathematically you have now saved enough to last you 20 more years until age 60. At age 59.5, you are then allowed to withdraw any money from your tax-deferred retirement savings penalty free.

The money you saved in this time period can be spent in full, if so desired, every year until you hit age 60. By the time you are 62-65, you are then eligible for Social Security benefits to compliment your other tax deferred retirement savings.

EXAMPLE 1: AVERAGE JANE

Jane is a University of Colorado grad who majors in English. She gets a job in Denver as a telecom services provider sales rep.  It’s not the best job in the world given her interests, but it pays the bills while she stays with her parents for the first 3 years to save money. At the age of 25, she moves out and co-habits with her boyfriend, saving money in the process.

From ages 41-60, Jane can spend roughly $29,163 a year until age 60 and never have to do anything at all! That’s right. With her $530,250 saved up, she doesn’t need interest or investment returns to spend $29,163 a year. So long as she doesn’t increase her lifestyle she’s grown accustomed to for the past 18 years, she’s fine. Jane can also earn a risk-free 2% return on her $583,275, which yields roughly $11,500 to go on top of her $29,163 to equal roughly $39,000 in after tax income a year.

If we exclude the interest income, $29,163 a year is not exactly a lot to spend, but during her working years from age 22 to 40, she was only spending about $32,000 a year after taxes anyway. In order to make her money go farther, Jane could move to a cheaper country, live with a working spouse, work part-time, or attempt to invest their money. If she’s been used to living off $32,000 working, suddenly, there are 8-10 hours more a day to make $2,837 a YEAR to close the difference and then some!

EXAMPLE 2: FLOYD, THE GO-GETTER

Thanks to Financial Samurai for letting us share portions of their article, How to Retire Early and Never Have to Work Again. Read the full text of the blog post here.

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How much retirement money are you leaving on the table?

What Does $24 Billion Mean for Me?

That's a huge number to digest. Here's how researchers arrived at it. They examined the retirement funds of 4.4 million participants from more than 500 companies. Twenty-five percent of those participants were not contributing enough of their own money to their 401(k) to take advantage of the company's full match. $24 billion averaged out to about $1,336 in uncollected employer match funds each year. Over 20 years, the missed funds could add up to over $42,000 per employee.

Here's another way to look at it. Let's say you work for a company that matches 50 cents on every dollar you contribute. If you invest six percent of your $50,000 salary, that's $3,000 per year you are contributing and $1,500 per year your employer is giving you. In effect, you are getting a tax-free, $1,500 raise.

How Much Is Enough?

"How much should I be contributing?" is probably the most common question asked of financial advisors. However, the answer is not always straightforward. "As much as you can" is the simple answer, but that leaves room for a lot of interpretation, and is sometimes a cop-out. Each situation is unique. For example, a 40-year-old that has never contributed to a retirement plan needs to start saving fast, contributing at least 15 percent. There are restrictions, though. For 2015, employees are allowed to contribute up to $18,000 annually or an extra $6,000 if they are over 50. Conversely, a recent college graduate starting his or her first real job at 22 can afford to start at a lower percentage. A good rule of thumb is to contribute at least the maximum that can be matched. Most companies that offer matching will only do so up to a certain percentage of your salary. You want to at least contribute enough to maximize that match.

The best way to accurately assess how much you need to contribute is to talk to a financial advisor that can come up with an overall retirement strategy that includes your 401(k) and other resources available. While a 401(k) is nice in that it does not need constant attention, you should monitor your growth periodically and talk to your financial advisor to see if you are on track. For example, it's generally recommended that your 401(k) include at least one year's salary by age 30. How much could that end up being? If you had $40,000 in your 401(k) by age 30 and never added any more money, you would have $600,000 by 65, figuring an average eight percent annual return. That amount will only grow with increased contributions.

A financial advisor can help you ensure you're taking full advantage of your 401(k) matching program.

Who's Most at Risk?

Researchers also examined what demographics are missing out the most and what factors contribute to employees' financial decisions. Here's what they found.

• Young employees are missing out. Employees under 30 are twice as likely to miss out on employer match programs than employees over 60. This isn't necessarily because they don't see the importance. Many young adults have endured unemployment, as well as massive student loan debt. According to USA Today, 40 million Americans are carrying $1.2 trillion in student debt -- any extra each month likely goes toward paying that down. Graduate students may still be attending school, balancing the increasing cost of tuition with supporting themselves.

• Lower salaries = lower matching. Forty-two percent of employees earning less than $40,000 annually were not taking full advantage of employee matching, compared to only 10 percent of employees earning over $100,000 a year. It's understandable that those that make more can contribute more. However, remember we are talking percentages. As illustrated above, even small percentages will grow exponentially over time. Waiting until you start making more is not an effective strategy. You will lose thousands in "free" matching money.

• Middle-age poses new obstacles. The research showed middle-aged employees decreasing contributions. This stage in life often brings new expenses, including the cost of raising children and saving for their college funds. However, the point is that every stage in life presents challenges to saving. Middle-age is not the time to decrease contributions and lose out on valuable employer matching.

• Getting an advisor matters. Employees across all demographics were less likely to miss out on employer contributions when they worked with a financial advisor. For example, among employees earning $20,000 a year, only 18 percent that worked with a financial advisor were still not taking advantage of employer matching. Among the same income bracket, 48 percent that did not get advisory services were not reaping the rewards of employee matching.

Take Action

Regardless of your income level, age or industry, resolve to take full advantage of your company's retirement benefits today. Start by gaining an understanding of your plan. How much does your employer match your contributions? Are you leaving money on the table? Commit to regularly increasing your contributions. A good time to do this is with each year's raise. Lastly, get professional help. Your 401(k) should be just a piece of your retirement strategy. Let an experienced advisor help you create a customized plan based on your retirement goals and your current financial situation.

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