Mid-Career Retirement Planning
Mid-Career Retirement Planning
You’re experienced in your field. You have more responsibilities with your growing family. And you have a lot more bills and expenses!
Although you may feel stretched in several directions, you need to make sure to plan for your future. Before you know it, retirement will be in view.
For some people, this is the time to start maxing out contributions to your retirement plan. Others might be tempted to withdraw whatever retirement savings you have in order to cover big expenses.
How much to save for retirement
The most common question we get from employee participants is how much to save for retirement and whether their savings are on the right track. Generally, investment experts recommend putting between 15% and 20% of your income now toward retirement. Your account portal features several calculators that will help you gauge whether you’re on track with your retirement savings. Also, our retirement counselors are happy to review your account with you and answers questions to help you maximize your contributions.
Now is the time to take a hard look at the lifestyle you dreamed of living in retirement and compare those dreams against your savings. The rule of thumb for retirement savings is to accumulate enough to replace 70%-80% of your annual income, including Social Security. Naturally, that percentage depends on how comfortably you want to live. This is the optimal stage in life to make changes if you feel your retirement savings isn’t where it needs to be.
Give your CRA plan a checkup
Now might be a good time to reassess how you allocate your retirement contributions. Work toward increasing your contribution amount, such as by establishing and growing a 457(b) account if your employer offers it. In fact, after you reach age 50, you can make additional contributions to your 457(b) account if you feel your retirement savings isn’t where it needs to be.
Also do a checkup on your investment portfolio.
If you’ve selected a CRA target date portfolio for your age group, your lineup should be appropriate for your projected retirement. If you’d prefer to select your own investments, check out the CRA Investment Learning Center to learn about smart investing. The closer you get to retirement, the more conservative your investments should be.
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Resist withdrawing savings
If you change employers, or if your employer allows for loans against your retirement savings, you might be tempted to make a withdrawal. We get it: that nest egg may come in handy if you’re facing large expenses or you’re not sure when you’ll get a new job. Our advice is to resolve not to use your CRA income until retirement.
For one thing, you’ll no doubt need that money in retirement. For most people, Social Security will only replace a fraction of their working pay. Even if you qualify for Medicare, you likely will pay a monthly premium and out of pocket expenses for doctor’s services and medical supplies.
Secondly, retirement plan withdrawals may be subject to 20% IRS tax withholding, and on top of that, may be subject to 10% withdrawal penalties (on the full amount, not the 80% you actually received!) when you file taxes for anyone younger than 59½.
You should ask yourself if a withdrawal really would be in your best interest. If you still think you need to withdraw against your retirement savings, consider only taking what you feel you really need rather than the entire account balance.
Stay in the plan
You might have other retirement plans from prior employers before you begin a CRA retirement plan. You can move other eligible prior retirement assets into your CRA account, including: 401(a), 401(k), 403(b) 457(b) and most IRA accounts. The benefits of consolidating include potential savings when you compare the fees of other providers to CRA, simplicity and clarity with being able to view your entire retirement savings all together.
You might change employers in the future. If you move from one CRA member employer to another within 30 days, you won’t lose your vesting status, which entitles you to more of the employer contributions paid into your account. If your new employer offers a different retirement plan, consider retaining your CRA account to continue enjoying the benefits of our plan. If you ever leave that employer, you can move those assets into your CRA account.
Advisory and self-directed brokerage services
You might be interested in opening a self-directed brokerage account or accessing advisory services (additional fees apply). The brokerage account enables you to access funds beyond those available through CRA’s core portfolio. Empower Retirement Advisory Services connect you with a team of investment advisor representatives.
More details about these added services are available in the Investment Learning Center.
Designate beneficiaries, create a will and start estate planning
Take a moment to ensure you’ve designated beneficiaries for your retirement account. You can do this through the account portal by clicking on Accounts and navigating to the forms section, or by calling 800.352.0313.
A beneficiary is the person or people who will be designated as your CRA account owner(s) in the event of death.
It’s also a good idea to create a last will and testament and estate plan to legally ensure your wishes are honored in the event that you die or are incapacitated.
Consider a financial advisor
At this stage, you are likely to be juggling credit card payments, auto loans, a mortgage and possibly other major expenses such as putting a child through college or supporting aging parents. Now might be the right time to sit down with a financial advisor to get a big-picture view of your financial situation, develop a long-term financial strategy, ensure you have proper insurance protection and mitigate tax penalties.