A lot has changed over the last decade. The number of public school students to graduate on time has increased sharply. Education has moved online. The average educator salary has increased from $40,496 to $49,113 today.
What about your own situation? Have you gone from being single to married? Couple to family? Renting to owning?
No doubt, your life has changed considerably in the last decade. But, has your savings plan kept up with the times as well?
Saving for your future is important, no matter where you are in your career right now. Equally important is to adjust your plan to keep up with the times and to accommodate the differences in your life. If you enrolled in a tax-deferred savings plan a decade ago, are you contributing more, less or the same as when you first joined?
If your participation level has stayed the same all these years, now would be a great time to review whether you are still on track to enjoy financial freedom and pursue the possibilities in retirement. Here are some key things to consider:
- As people get closer to retirement, many tend to become more conservative and cautious with their finances. Have you contemplated your appetite for risk lately? Investing for the long term requires reviewing and rebalancing your accounts as you approach life milestones, such as buying a house or expanding your family. Many individuals with 403(b) plans don’t assess their account risk tolerance or rebalance it once they’ve enrolled. If you haven’t reviewed your investments lately, it’s time to take a look.
When you first enrolled in a tax-deferred saving plan, you probably selected an arbitrary round number to contribute to get yourself started, such as $50 or $100 per paycheck. Has that initial amount changed over time? If your salary is higher now than when you first enrolled, it’s a smart idea to increase your per paycheck contributions, too.
Some individuals tend to settle on an arbitrary amount without understanding what that will look like when they actually retire. To help determine the right amount to contribute, think about your long-term goals. Do you want to live a downsized, simpler life or do you plan to travel and indulge in your passions? Whichever you decide, work backwards from your expected retirement date to determine how much you’ll need to save each paycheck for as long as you plan to keep working.
Savings and investment products in a 403(b) evolve over time. Compare plans from 10 years ago to today. The number of investment options, features, charges/fees and enhancements are some things to consider helping you prepare for your future. Understand that you have control to choose where to invest your contributions.
If retirement is approaching sooner rather than later, you can participate in funds with greater protection such as a conservative asset allocation. A fixed account offers a guaranteed interest rate and protection from market volatility. If you are more of a risk taker or have more time until you retire, you can choose from moderate asset allocations, which have the potential for faster and greater growth. To balance risk, you can also allocate investments into various asset allocations, so part of your contribution can go to moderate funds and part to a more guaranteed return option.
The most important thing to remember is that not all 403(b) plans are the same. If it’s been years since you’ve looked at your savings plan, take a look today. Are you comfortable with your financial strategy or do you want to change it up?
Your retirement plan needs to be as flexible as your retirement objectives. If you need help to determine what’s right for you, a financial professional can work with you to identify your current needs and priorities, as well as long-term goals, so you can achieve the future you deserve.
Asset Allocation is a method of diversification which positions assets among major investment categories. This tool may be used in an effort to manage risk and enhance returns. However, it does not guarantee a profit or protect against a loss.
Please read all applicable prospectus(es) carefully before purchasing the retirement plan. For a current prospectus(es), contact your financial professional. Please be advised that this document is not intended as legal or tax advice. Accordingly, any advice provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. Such advice was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and your clients should seek advice based on their particular circumstances from an independent tax advisor. Retirement plan products are issued by Equitable Financial Life Insurance Company (Equitable Financial) (NY, NY) and are co-distributed by Equitable Advisors, LLC and Equitable Distributors, LLC. Equitable Financial, Equitable Advisors and Equitable Distributors are affiliated companies and do not provide tax or legal advice. Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company (NY, NY); Equitable Financial Life Insurance Company of America, an AZ stock company with main administrative headquarters in Jersey City, NJ; and Equitable Distributors, LLC. Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI & TN).GE-3646373 (6/21) (Exp.6/23)