Starting Out

Tips on Setting up a Successful Retirement Plan

Do you wonder if you’re taking the right steps towards a successful retirement plan? Here are some tips that can help you make sure you’re on track.

Know your starting point

  • What are the balances in your existing 403(b), 401(k), IRA, or savings accounts?

  • Do you own other assets which may be convertible to cash in the future?

  • What is your current income level?

  • Do you currently have or follow a household budget?

  • Does your employer offer a retirement plan?

  • What are you currently contributing toward retirement?

  • Are you taking full advantage of any possible employer match?

  • How much experience do you have with investing?

  • What is the current asset allocation of your investment portfolio?

Set realistic goals

  • How long do you have to save before retirement?

  • Do you know how much money you need to save for retirement?

  • How much risk are you comfortable taking with your investments?

  • Do you expect major future changes to your income or expenses?

  • How much can you realistically increase your contributions?

Avoid Pitfalls That May Reduce Savings Today and in the Future

  • Set aside and maintain an emergency fund for unexpected expenses.

  • Do not wait until late in your earnings years to start saving—start early.

  • Once you start saving, continue the habit, even if it is a small amount.

  • Avoid withdrawals during earning years, including loans and hardship distributions.

  • When you leave an employer, rollover your assets—don’t cash out your account.

You do not have to do this on your own

  • Discuss financial goals with your spouse and family.

  • Review potential budget changes and opportunities to increase contributions.

  • Read and learn to understand your account statements.

  • Utilize professional advice from your investment providers when it is available.

Explore the various tools and resources you have access to through Envoy.

6 Smart Retirement Plan Investing Tips

If you haven’t started putting money away for retirement, now is the best time to start! The thought of saving enough money for those 30 plus years of retirement sounds daunting, but if you’re well prepared, you will have nothing to worry about.

Here are 6 tips that will help you with successful retirement plan investing.

Know Your Investment Options

There are many different ways you can invest your money. If you’re employed, find out what kind of retirement benefits your employer offers.

There are different types of retirement plans such as:

  • 401(k)/403(b)/Company Plans

  • Traditional/Roth IRAs

  • And More!

As well as different types of portfolio investments such as:

  • Mutual Funds

  • Exchange Traded Funds (ETFs)

  • And More!

It’s important to understand the risk/reward return when you’re building your portfolio. Generally more aggressive (higher risk) investments may deliver higher average returns over time, however, this is offset by a higher potential for loss of principal compared to safer, more conservative investments. Generally, those nearing retirement will opt for a lower risk/lower return because they have less time to recover from loss.

Start Saving Early

It seems easy enough, but many people feel like they can’t start saving for retirement when they ‘re younger because they’re not making enough. Here’s the thing—you don’t need to save 10% of your income right away. Start saving 3% and as your pay increases, gradually increase how much you’re investing.

The earlier you start saving, the more you will have in retirement. You will also have the time to invest more aggressively and should be able to recover from any loses.

Set Goals

Decide when you want to retire, what you want to do in retirement, and how much money you’ll need to live off that lifestyle.

For example:

  • I want to retire at 65.

  • I plan on paying off my house and all debt before retirement.

  • I plan on traveling.

  • I plan on having medical expenses.

  • Based on my plans, I’ll need $48,000 per year in retirement.

  • I estimate that I’ll live 20 years in retirement. Thus, I’ll need a minimum of $960,000 saved. Keep in mind that this does not take into consideration inflation, taxes, any changes to social security or investment earning rates, etc. It is also very likely that you could live longer than 20 years after you retire.

Keep Your Emotions in Check

Don’t let your emotions direct the way you deal with you investments. Understand that they will fluctuate—sometimes a lot, sometimes a little. If certain investments don’t seem to be doing well, look for another one.

Know Your Fees

All investment companies have expenses for the services that they provide. Unfortunately, most people do not know this because they haven’t been given complete and accurate value expense disclosure information. It’s a good idea to find out how much you are paying fees and search around for better options if you think they are too high.

Ask Questions

At Envoy, our service team is always available and happy to serve you. Please contact us with any investment questions you might have and we will be happy to direct you to the right answer.

Looking for faith-based IRA options? The FaithBased IRA from Envoy Financial could be the perfect solution for you!

6 Basic Retirement Rules

As a Christian, you are called by God to serve. This calling does not end when you stop receiving a paycheck.  Retirement is not only a reward for past service but a stepping-stone to future ministry. We call this your Future Funded Ministry! When you successfully construct and fund a retirement plan, you are creating a source of money to fund your future ministry activities. What an exciting way to live!

The following Retirement Rules will equip you with basic strategies to help you achieve your Future Funded Ministry plan!
 

Rule 1:  Save at least 10% of your income towards your Future Funded Ministry plan

This provides a simple target for you to work towards as part of a disciplined savings approach. You may start at a lower level and then focus on increasing your contributions over time to get to this percentage.

Rule 2:  Plan on living 20-25 years in retirement after age 65

People who live to age 65 have a 50% chance of living to age 85 and a 25% chance of living until 92.

Rule 3:  Plan on needing 70% to 80% of your income in your Future Funded Ministry years

Certain expenses will likely disappear or be reduced once you leave the workplace.

Rule 4:  To make your savings last, withdraw less than 4% a year

This simple formula has proven very accurate over time. It provides a guideline for how much to withdraw each year without exhausting your Future-Funded Ministry savings.

Rule 5:  Rebalance your asset allocation at least once per year

Rebalancing is when you adjust your portfolio back to an appropriate asset allocation mix. This keeps your investments aligned with your risk tolerance and goals.

Rule 6:  Bonds percentage of your portfolio equals your age

This rule is a reminder that your portfolio needs to change as you age, becoming gradually more focused on avoiding risk and providing income.

5 Factors That May Affect Your Retirement

Inflation

  • Reduces how much you can buy today, compared to last year

  • Historically, inflation averages 3% annually

  • Your investments need to keep pace with or outpace inflation

Investment Risk

  • Determine how much potential gain you are aiming to achieve with your investments, understanding that also means you may potentially lose a similar amount

  • More risk equals more volatility in returns and account values go up and down more

  • Diversify your portfolio by allocating money to multiple asset classes so you are not totally exposed if one asset type (such as stocks) drops dramatically

Healthcare and long-term care expenses

  • A number of studies show that the average 65-year-old couple can expect can expect to spend hundreds of thousands of dollars on healthcare in retirement

  • The combination of increasing life expectancy and growing medical treatment costs can have a huge negative impact on savings

  • Consider obtaining Long Term Care insurance

  • The premiums can be significant, but having the coverage in place may help avoid disrupting your overall retirement planning strategy

Taxes

  • Employer-sponsored and individual pre-tax accounts offer a variety of ways to receive tax breaks when making your retirement savings contributions

  • Pre-tax contributions provide a current reduction in taxable income, and therefore a reduction in the taxes you pay each year as you are adding to your accounts

  • Roth contributions are done on an after-tax basis, which does not provide a current year tax advantage but does allow you to make withdrawals on a tax-free basis in retirement

You

  • Set goals for what your financial needs will be in retirement

  • Evaluate your personal risk profile and asset allocation strategy

  • Take full advantage of any employer matching contributions you may be eligible for

  • Roll over assets from former employer plans rather than cashing out those accounts

  • Seek out trusted professional guidance or use available self-help tools