Retirement Strategies for Early, Middle and Late Careers

It's not what you earn, it's what you save.

This could be you one day. Will you have saved enough money. (Matthew Nigel/Shutterstock

This could be you one day. Will you have saved enough money. (Matthew Nigel/Shutterstock

When it comes to mapping out our careers, most of us spend more time thinking about how to make money than what to do with it. The ideas of climbing the corporate ladder, launching the next billion-dollar tech start-up or achieving the American Dream are deeply ingrained in our society. Retirement planning? Not so much.

A recent study by GoBankingRates found that 62 percent of Americans have less than $1,000 in savings. The same study found that 18 percent of 25-34-year-olds don’t even have a savings account. Retiring without enough money remains a top financial concern of many working adults, yet 29 percent still don’t save for retirement, according to the 2015 Consumer Financial Literacy Survey.

Most of us want to save for the future, but many simply don’t know how. The key is that your retirement plan should be re-evaluated at each stage of your career in order to truly maximize your savings and investments to meet your goals. Here are a few strategies for retirement planning during the beginning, middle and end of your career:

Just Starting Out

The primary principle of investing is that the earlier you start saving and investing for any goal, the less money you have to save later on. This is especially important as we look ahead to a retirement without pension plans and likely without significant contributions from Social Security.

A good rule of thumb is to invest at least 10 percent of your income in a retirement savings account such as a Roth IRA or 401(k). If your company offers a matching program, make sure to have at least invest as much as they will match each year. Leaving that free money on the table is one of the biggest financial mistakes made by young professionals.

Your investment strategy should also reflect where you are in your career. With 30 or so years until you retire, you should invest aggressively with at least 75-80 percent of your asset allocation in stocks. I know this recommendation can be challenging for Millennials, as many of you came of age during the stock market volatility and recession in 2008 and the years following. According to UBS Q1 2014 Investor Watch research, your generation is as risk-adverse and financially conservative as those raised during the Great Depression. Yet it’s important to remember that the market rises over the long term. If you don’t need your retirement money for 30 years, it doesn’t matter how deeply the stock market falls in the next several years. We know that it will eventually rise – along with the money you have invested.

Hitting Your Stride

There are more nuances to saving in the middle of your career, so it’s important to take advantage of the most appropriate vehicles to maximize your efforts. For example, this is the time when parents should consider a 529 account for tax-free savings to maximize contributions to a child’s education.

By mid-career, it is likely that you have switched jobs at least once or twice and have savings left in old company 401(k)s. I usually recommend that my clients roll over that money into a traditional IRA. We would then evaluate whether or not converting it to a Roth IRA is fitting for your financial situation. The Roth IRA may make sense for some over the long-term because there is no tax on the growth of that money upon withdrawal. If you work for a firm that provides some compensation in company stock, now is the time to re-evaluate your investment strategy and diversify your holdings. It’s great to be invested in your company, but we are all aware of the risks of investing too much of your net worth in one company or sector. A financial planner can make sure you are diversified across the right mix of stocks, bonds, domestic and international assets to best meet your goals.

Approaching Retirement

With five to 10 years left before retirement, now is the time to finalize your retirement and estate plans and be very cautious about your investments. You need to analyze projected spending for retirement to see what you can afford, and if that will require working longer, taking on more risk or eliminating some risk from your portfolio. When it comes to estate planning, you will want to work with a financial adviser, estate attorney and CPA to ensure you are leveraging appropriate vehicles to take advantage of as many tax breaks as possible. You will also want to conduct a Social Security analysis to understand your options for when to claim it and how to maximize your benefits. There are many ways to claim Social Security, so it’s important to work with someone who can determine the best strategies for your specific goals.

It’s time we start viewing retirement as a rung on that corporate ladder, planning for it throughout our career the same way we work towards a promotion. And by taking advantage of the unique saving and investment opportunities that each stage offers, you will be able to make the most of every dollar you save and enjoy the retirement you worked so hard to earn.

Brad Bernstein is a senior vice president of wealth management and Certified Financial Planner with UBS Financial Services Inc., in Philadelphia. The firm provides wealth management services to clients, and offers investment advisory and brokerage services. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc.