One day, you’ll retire and leave the fast-paced life of a first responder. While that day may seem far off, it’s never too early to start planning.
Taking the first steps now will help you make the most out of your retirement later. Here’s what to consider.
What Retirement Will Cost
When you retire, you’ll want to be able to live a similar lifestyle to the one you enjoy now. Starting with the costs of your current lifestyle, you can estimate how much you’ll need for retirement. A general rule is that you’ll need about 80% of your current monthly salary to cover your needs in retirement.
Begin by estimating these costs now and in retirement. When thinking about future costs, you’ll also want to account for inflation (about 2% per year).
The average American life expectancy is nearly 85 years old. That means, if you retire at age 65, you’ll need about 20 years of retirement income.
So, how much retirement savings do you need? Depending upon the cost of living where you are, you will likely require between $1 million and $2 million total to retire comfortably. If that figure alarms you, you’re not alone. Retirement can be daunting if you’re not prepared.
How Much Money Will You Have?
You won’t have a job when you retire, but you will have sources of income. This includes money in savings accounts, investments, retirement accounts, and more. Calculate how much money you will have based on these income sources.
Putting money away each month for retirement really does pay off. That’s because, over time, you earn interest on your interest. Financial experts recommend banking 15% of your income each year. While historically, many people set up savings accounts at the brick-and-mortar bank where they have their checking account, you won’t earn a lot in interest. Consider a high-yield savings account offered at online institutions that are insured by the FDIC.
Social Security Benefits
Social security is a government program that provides income to retired Americans. It’s based on your lifetime earnings. You pay into the social security system every year that you work and then are eligible for money back when you retire. While social security is a great foundation for retirement, most Americans find that it’s not enough to cover all costs. You can calculate your anticipated social security here. (Note: Some states do not participate in social security for public employees. In those cases, the state offers a public retirement system. If you work in Alaska, Colorado, Louisiana, Maine, Massachusetts, Nevada, and Ohio, you may not receive social security.)
Retirement Savings Plans
If you’re a first responder, chances are that you have a 457 Plan. Similar to a 401(k), a 457 plan is offered by state and local public employers. In both plans, you can contribute pretax money from your paycheck, which then grows without being taxed until you withdraw it. You also may consider setting up a Roth IRA. While your contributions are not deductible, you are not taxed when you withdraw the money. Know which plan you have and its benefits. In many cases, you can choose low, medium, or high-risk plans, which can impact how much you will earn over time.
While pensions are increasingly rare, some employers, usually public sector and unions, still offer them. With a pension, you will receive some percentage of your annual income based on how long you worked for the company. You have to meet the vesting requirements, which means that you have to work a certain number of years in order to qualify.
If you served in the military, you may be eligible for military retirement benefits.
Many retirees work part-time to supplement their income or simply to keep busy.
Prepare for the Emotional Transition
You’ve spent your whole life serving others in a fast-paced, high-stress job. Retirement will be different, and as a result, could leave you with feelings of emptiness. Stepping down from your job could cause you to feel you’ve lost your purpose. Make sure that you prepare for the emotional transition as well as the financial one.
Figure out where to spend your time
You may wish to travel, spend time with your grandchildren, or volunteer. You may want to work on the house or the yard. You can take continuing education classes at the local college or offer to teach them at your community center. Ask around to find out about the opportunities in your community. Structure your days into a retirement routine that gives you a sense of purpose and an opportunity to enjoy life.
Connect with former team members
First responders are more than just coworkers. You’re a tightly-knit team, and when you retire, those bonds don’t suddenly disappear. Schedule time to connect with your former team members on a regular basis. It will do wonders for your mental health as you tackle retirement together.
Practice healthy habits
Keep yourself healthy through retirement by eating right, exercising, and staying on top of medical screenings. Staying healthy will help you to enjoy retirement to its fullest.
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