There’s a good chance if you are in your late 20’s or early 30’s that you’re not actually planning for retirement. Most employers will offer some sort of 401-k, but do you know how much you are contributing and all of the other details that go along with a 401-k? It can be hard enough for some 20 or 30-somethings to pay student loans, car payments, rent, plan a vacation, get married without going into extreme debt, or simply go out on a date, let alone plan and save for retirement. If you’ve been working consistently for maybe eight to ten years, it’s time to start thinking about the future, even if it is 30-40 years away. A big turn-off for hiring a financial planner is the cost, so it can be overwhelming to think about using your hard- earned money, the little that’s left after monthly bills, for hiring a financial planner, but there are five reasons why it is important. At KNR Consulting Group, we understand that your money is important to you, and we want to make the most of it. Contact us today to get started.
Having a paycheck means paying federal and state taxes, and social security. With the deductions taking a large chunk out of your paycheck, it may seem like a safe to thing to assume that you’ll get your money back after filing each April. However, to a financial planner, this can be a sign of poor planning. The government doesn’t pay you interest on the amount you overpay in taxes. This amount could be sitting in an account and earning a return. However, the government is using your tax dollars interest-free until you receive your return.
How Much Are you Paying for Investments?
Because a 401-k is an employer benefit, you may not think of paying into it as an investment, but that’s exactly what it is. All types of investments have fees, 401-k being one of them. There are administration fees and expenses, possible marketing expenses, and management fees and expenses. With 401ks, there are load funds, which charge a commission, and no-load funds, which are commission free. Within load funds, there are back-end and front-end commission structures, both have commission rates which is a percentage of the investment, from three to 6.25 percent. With almost all load funds, there are distribution fees, or 12b-1 fees, used to pay promotional costs. With all of these potential fees, take some time to understand what type of 401-k you are paying into and what is involved. Keep in mind that the important number is how much you keep from investments.
Create a Strategy for Down Markets
Following the tech bubble in 2000 and the housing bubble in 2008, it’s becoming known that a down market will occur every five to seven years. So it could be possible that another down market is just around the corner. Being prepared for these events will ensure that your entire future’s savings are not blowing in the wind. With a financial advisor, they can help plan for these events in order to protect your money for retirement.
Are you Saving Enough Money?
With current government and political turmoil, who knows what will happen in 20, 30, or 40 years from now. Who knows how much money you will need on a daily, monthly, yearly basis? There are online tools to help you get a broad view of what to do, but there are a lot of things to plan for that these tools do not include. A financial planner will take into account your current expenses, tax rates, annual returns, life expectancy, and many other factors that play a part in how much you need to save for retirement. With all of this information, a financial planner will create a planning strategy to ensure you have enough money to live comfortably during retirement.
Create a Survivor or Legacy Plan
Spouses, children, and grandchildren can all benefit from you hiring a financial planner now. Legal documents such as wills and trusts are created to detail who will receive your money should anything happen to you. A financial planner will not write these documents for you, but they will help provide a plan on how to give your assets to family, friends, or charities.
When you are struggling to just stay afloat in your 20’s or 30’s, it might be inconceivable to even think about hiring a financial planner. However; that may be the best time to consider it. The money you earn, how you spend it, and how you save it will affect your life during retirement. There are cute images online warning of the dangers of not planning ahead; the ‘D’ in the word ‘ahead’ is on the second line or scrunched in the corner, don’t let that happen to you. Not planning for your future can have significant consequences and running out of money during retirement is one of the greatest. Contact KNR Consulting Group to have the best retirement planning advice.