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Ready, Set, Retirement

Lay the groundwork for retirement no matter your current age 

Family Wealth Group Vice President of Financial Services Jeff Sheppard advises a customer about retirement planning. Photo: Family Wealth Group
Sheppard explains the differences between between 401(k) plans, Roth IRAs and trusts. Photo: Family Wealth Group
Sheppard says it’s important to educate clients about everything from saving for retirement to how retirement income is taxed. Photos: Family Wealth Group

Eventually, whether it’s 40 years away or four, there will come a day when you hang up your work hat for the well-deserved rest and relaxation of retirement. 

But are you ready? 

Studies by the Federal Reserve show that a quarter of working Americans have no retirement fund at all—through either a pension or savings in retirement accounts like a 401(k) or Roth IRA. 

Planning for retirement is key, whether you’re just starting out in your career or are nearing the finish line. 

To ensure that you’re financially prepared for retirement, consider these key steps. 

Educate yourself about options 

No matter where you are in your work timeline, it’s never too soon to begin learning about retirement savings options, and how—and when— you’ll be eligible to start receiving important benefits like Medicare and Social Security. 

While most Americans can’t draw full Social Security benefits until age 66 or 67, depending on their date of birth, it’s possible to start drawing a portion of Social Security benefits at 62, with Medicare benefits kicking in at 65. 

As a result, 62 to 65 is a time window in which many Kentuckians opt to retire, says former University of Kentucky basketball star Jeff Sheppard, a Jackson Energy consumer-member and vice president of financial services at Family Wealth Group, which has offices in Lexington, Louisville, London and Somerset. 

Talk to your employer to understand the benefits available to you upon retirement. Consider working with a professional financial advisor, who can guide you through your savings options and the tax liabilities of each. 

For example, most Americans aren’t readily aware of the tax and savings differences between a traditional IRA and a Roth IRA. Moreover, tax codes and savings contribution maximums can change from year to year. That’s where seeking professional retirement planning help can be key. 

“We want to try to educate people so that they can understand the basics of how things work,” Sheppard says. “One of the biggest misconceptions people have is thinking that their retirement income is going to be taxed exactly like their work income, which isn’t the case. From a tax standpoint—and from an income standpoint—there’s a huge difference when you receive a paycheck from work, versus a paycheck from Social Security, versus a paycheck from a pension, versus a paycheck from different investments. And all of that matters.” 

“One of the biggest misconceptions people have is thinking that their retirement income is going to be taxed exactly like their work income, which isn’t the case.” 

—Jeff Sheppard 

Envision your ideal and start saving early 

Does your perfect retirement mean quiet time at home with grandkids or your garden, or lots of PGA-course golf and world travel? 

Identifying what retirement means to you is the first step in determining how much money you’re likely going to need to make that dream a reality. 

“A vision for the future is very important,” says Melody Townsend, a certified financial planner and founding principal of Townsend Financial Planning, which has offices in Mt. Sterling, Lexington and Louisville. 

“The thing that we try to get 20- and 30-year-olds to realize is just that it is going to take a lot of money to be able to retire in the future,” Townsend says. “It’s imperative to start early and stay focused on your savings goals.” 

Townsend advises clients that for every $1,000 per month they may need in retirement, they need to plan to have around $250,000 saved. 

“It’s about finding a balance,” she says. “You can’t save everything for tomorrow, but you also can’t live just for today. The longer you wait to start saving, though, the larger the hurdle will be.” 

Make the most of employer-matched contributions 

No matter your age, if you’re not claiming the full amount of your employer’s available retirement contributions, you should be. 

“One of the biggest mistakes I see is people not taking advantage of what their employers are offering to give to them (in retirement fund contributions or matching),” says Meade County RECC consumer-member Ryan Stith, a certified financial planner and founder of Pivot Point Wealth Planning in Brandenburg. 

Educate yourself about 401(k) contributions your employer offers and be sure to allocate enough savings to your retirement account each year to maximize that contribution. “Otherwise you’re leaving money on the table,” Stith says. 

Stith also recommends that workers set up their retirement contributions to come out of their paychecks automatically. “Automating (the retirement contribution) and paying yourself first, making it a non-decision, is the best thing that most people can do,” he says. 

Be vigilant in the five years before and after retirement 

Working to make sure your retirement savings and investments are on target to meet your goals is especially important in the pre-retirement period, roughly five years from your planned retirement date, says Sheppard. The years just before retirement offer a crucial window in which to tweak your savings and estate planning portfolio. 

Don’t let your guard down immediately upon retirement, though. The first five years post-retirement can be an ideal time to move assets into accounts that offer more favorable tax options. 

“There are a lot of opportunities in the five-year window both before and after retirement—and sometimes before a client takes Social Security— that could be missed if someone is not working with a professional,” says Townsend.

Advice from a pro 

Jeff Sheppard followed his University of Kentucky basketball star turn with a career in financial planning. He shares retirement planning tips in this video.

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