We work to live, not live to work. With this in mind, it is important to plan what our life will be like when we reach the golden years. If you aspire to be relaxed, comfortable and retired, you must start planning your retirement strategy as soon as possible.
A good retirement plan consists of healthy strategies, which include savings through different products, with the goal of maximizing distributions when we retire. The key is to start as soon as possible.
To determine how much you should save for your retirement, there are 4 key factors to consider.
As a general rule, the earlier you want to retire, the more savings you will need, and the earlier you should start contributing to your retirement. The less time you have between your current and your retirement age, the more you would have to contribute per month to get to the same place.
If your employer offers a retirement plan and matching, take advantage of it to the fullest! One benefit of these plans is that some companies match part of your contribution. This is done automatically; your contribution is withheld from your paycheck and the money is saved without passing through your hands. Out of sight, out of mind.
If your employer does not offer a retirement plan, do not let that stop you. Remember to pay yourself first.
Any debt with a high-interest rate should be treated as a priority for payment. Create your budget and consider making extra payments to debt. Debts not only affect your retirement plan, but they also put at risk other financial goals you may have.
We don’t save just for retirement, but also for emergencies, buying a car or a house, education, and vacations. Focus on the big picture and prioritize according to the lifestyle you want to live.
As we have hinted throughout this article, the most important step is to start. The sooner, the better. Although each 401(k) plan is different, these allow for exposure to the stock markets, giving you the potential to generate interest, dividends, and capital gains by putting your money to work.1
Let's look at this example with an estimated annual return rate of 8%.
| Starting age | Target retirement age | Years investing | Monthly contribution | Total investment | Estimated value with 8% annual rate | |
|---|---|---|---|---|---|---|
| María | 25 | 65 | 40 | $150 | $72,000 | $523,651 |
| Juan | 30 | 65 | 35 | $200 | $84,000 | $458,776 |
| Yamilette | 35 | 65 | 30 | $200 | $72,000 | $298,071 |
This is a hypothetical example for educational and illustrative purposes only which does not include all relevant factors to consider according to your individual situation. It should not be considered a personalized investment recommendation, a recommended course of action or investment advice. This hypothetical example is based on the future value formula that assumes certain monthly contributions, a rate of return of 8% and that any interest, gain or dividend is reinvested. Actual results may vary depending on market conditions and/or selected products. There is no guarantee on obtaining an 8% return and past performance does not guarantee future results.
Although this example should not be considered financial advice, you can see how a difference of 5 years affects how much money we will have available for retirement and how much we would have to contribute monthly to achieve the goals1.
There is no one size fits all retirement strategy. Although you may recognize the most popular retirement accounts, such as IRAs, 401(k), and the Keogh Plan, we all have different goals in life and need different strategies.
Take advantage of the Retirement Snap service to help you navigate all the available options. Retirement Snap connects you with a retirement specialist to design the best strategy for you.
Retirement Snap considers important factors that will help maximize your instruments, such as:
They say that good things take time, so encourage yourself to visualize your retirement plan according to your long-term goals and take the first step today!
For more details on the different retirement strategies available, please email Popular's Retirement Center at educacionretiro@popular.com and check out Retirement Snap today.
Learn more about the tools and services available to manage your accounts and help you achieve your goals.
This information has been sent for educational purposes and for your independent consideration. This information does not contain, nor constitute or provide accounting, financial, investment or any kind of advice. This material does not include or consider all the factors that may be relevant to your financial needs; it is not to be considered, or to be seen, as advice or as a suggestion to take (or refrain from taking) any particular action. By providing this information, we assume that you are able to evaluate this information and the general descriptions found here and exercise your independent judgment. Banco Popular de Puerto Rico, its subsidiaries and / or affiliates, are not engaged in the provision of legal, accounting or tax advice services. If legal, accounting or tax advice services are required, you should seek the services of a competent professional.
The information presented regarding retirement plan performance is for educational purposes only and should not be considered financial advice or a guarantee of future results. Please note that investing in the markets carries inherent risks, and investment returns may vary depending on market conditions and the overall economy. Investment products within a retirement plan are not FDIC insured, are not deposits or obligations of, nor are they guaranteed by Banco Popular de Puerto Rico, its affiliates and/or subsidiaries; they involve risk and may lose value, including the loss of the principal invested.
