As people grapple with the realities of pension cuts and shrinking funds for social security benefits, Jim Winter, a St. Albans based financial planner, said they should remember one thing: “No one is going to take care of you unless you take care of yourself. If you want retirement to be what you envision it, you need to start the work now and realize you can’t depend on outside help.”
Winter founded Mountaineer Financial Planning, LLC in 2004 as an hourly-fee based financial planning firm. He said he works with people from all backgrounds and of all ages as they look for guidance on financial decisions.
Of course, Winter said, everything varies case-by-case — “your employer, your debt, your living situation, what you want out of retirement, it’s all dependent on the person” — but there are some general rules everyone can follow as they begin to explore options for financial planning.
The biggest thing people should remember, Winter said, is to start saving young and thinking early about retirement. When setting up 401(k) plans, employees with employers that offer a match should at least deposit up to that match into the fund.
“The nice thing with 401(k)s is it’s money that’s taken out before you see it, so it doesn’t feel like you’re losing money,” Winter said. “If you don’t at least put in what your employer will match, you’re leaving free money on the table — who wants to do that?”
As individuals age and spend more time with a company, hopefully meaning they will earn more money, they should start setting more and more money aside in their 401(k)s, Winter said.
“If you start small and build up, the immediate effect on you is little, and it really does add up,” Winter said.
Those who may not have the option of a 401(k) — due to their employers not offering one, which one-third of private-sector employers do not, according to Pew Charitable Trusts, or based on a personal preference — should explore alternative methods for savings, like personal individual retirement arrangements, Winter said.
Anyone with an earned income can open an IRA, and they should weigh the benefits of opening either a Roth IRA, which allows individuals to invest money into the fund after taxes then withdraw the investments tax-free in retirement, or a traditional IRA, which offers a tax deduction for any investment into the fund for the tax year it’s made.
These options for savings can provide a cushion for people in their later years, but the amount an individual should invest depends on what they are looking to get out of or do in their retirement, Winter said.
“Just as you should start saving early, you should start envisioning what you want your retirement to look like early,” Winter said. “This will give you an idea of how much you should save now and what changes you should make as you get closer to retirement.”
Another thing people should consider as they invest their money for retirement is ensuring they have a diverse portfolio — putting their money in different stocks, sectors and companies.
“You never really know when something is going to happen or come up, and a diverse portfolio offers you some security there — not putting all your eggs in one basket, so to speak,” Winter said.
Right now, the market is “very volatile,” Winter said, but that doesn’t necessarily mean people should panic. Depending on their age and the time they have until their retirement, market forces can have less of an effect on a person’s investment and savings plans.
“If you’re young, the fluctuations today are essentially immaterial to the time you’re going to retire,” Winter said. “As you get older, closer to retirement, yes, you should grow more conservative with your investments as those fluctuations will matter.”
Winter said the most common challenge he sees for people looking to start a financial plan is credit card debt. High credit card debt, balances and interest payments can really derail a savings plan.
“It’s easier said than done, obviously, but really, living within your means is the best way to be,” Winter said. “If you can do that, you should, and you will worry less.”
If individuals are looking to speak with financial planners, they should make sure to bring any relevant financial documents, including tax returns and current investment statements. They should also have an idea of what kind of savings they’re preparing for — will they have children, will they need a college fund, what kind of income do they see themselves earning one day, among other things.
“It used to be a company would help you take care of these things, but it’s not like that anymore, and I think that’s what people should be the most aware of,” Winter said. “People are really responsible for their own retirement these days, and while that can be difficult, there are ways to plan for what you want.”