When it comes to retirement planning, the term “pension” is becoming almost archaic. According to the Office of National Statistics (ONS) only 35% of workers in the private sector paid into a company pension fund last year. Most employers have adopted 401k plans and put the responsibility on the employee’s shoulders to take care of funding their own retirement. While having control can be a blessing, it can also be a double-edged sword. Especially, for those that don’t take the time to fully understand all of their investment options. For those people, there just might be a solution. It’s called the DB(k) pension plan and here are the rules on how it works.
401(k) Match + Pension Plan = DB(k)
What exactly is a DB(k) pension plan? Essentially, it combines the benefits of an income stream of a pension with the matching of a 401(k) plan. Many boomers that still have pensions, love them because they know they have an income stream that they can depend on. The DB(k) offers the luxury of that stable income with a matching contribution to boot. Might be the closest example of having your cake and eating it too when it comes to retirement planning.
DB(k)s Could Be Popular to Employees
Many small businesses will bypass a Simple IRA or a SEP IRA and go straight to the 401(k) plan purely because of name recognition. Employees like perks and a potential employer with a 401(k) plan with a match sounds much more attractive that a SEP IRA. The DB(k) has the potential to be the next household name of retirement plans. Most workers that I come across that have 401(k)’s don’t really understand them. Having a pension-style income like the one Mom and Dad had, may be a safer and less complicated solution.
Are DB(k) Plans Expensive for Employers?
It’s tough to say. With the recent adoption of these plans, it doesn’t seem that employers are rushing off to get these started. I’m sure the slumping economy is the largest barrier. For those companies that do start these, they most likely have a very good cash reserve. However, it isn’t as if a business is funding two retirement plans at once. In fact, any businesses that offer both defined benefit plans and 401(k) plans may unite them in this new option.
Less Paperwork Makes Everybody a Happy Camper
Companies with 2-500 employees are eligible to have DB(k)s pension plans. Where 401(k) plans must meet certain “testing requirements” for top-heavy rules, the DB(k) is exempt and with a plan document and one simple form 5500, your business is ready to rock and roll DB(k) style.
These plans are exempt from “top-heavy” rules, and a company can put one in place with just one Form 5500 and one plan document. The cost of the overall plan is the question. Being new plans, it’s hard to say, but based on most reports I’ve read the cost should be cheaper compared to having both a 401(k) and a pension plan.
Employee Benefits from DB(k) Plans
An income stream, an employer match and a really neat tool to save for retirement. In brief, the DB(k) has four compelling attributes:
Monthly Paycheck for Life. The income stream won’t replace an employee’s end salary, but it certainly will help. Employees that have worked for the company for a longer period of time are rewarded: the pension income equals either
a) 1% of final average pay times the number of years of service, or
b) 20% of that worker’s average salary during his or her five consecutive highest-earning years.
Automatic Enrollment for 401k. That employees save for the future by default. (They can choose to opt out.)
The company automatically directs 4% of a worker’s salary into his or her 401(k) account. The company also has to match 50% of that amount, which is vested upon the match. (Employees do have the choice to alter the contribution level up or down from 4%.)
It only takes three years for an employee to become fully vested in a DB(k) pension plan. So even if they leave the company, the money is theirs.
Is the DB(k) the Retirement Savior?
For now, it’s too tough to say. The strongest benefits I see is the ability to offer more to your key employees. If you’re able to offer a sweet retirement package, it may help retain and gather more productive and easier to manage staff.
A credit union is a nonprofit institution that’s owned by its members. Compared to a traditional bank, a credit union tends to offer more personalized service.
You can turn to a credit union for a variety of financial products, like checking and savings accounts, credit cards, car loans, and mortgages. Some regional and federal credit unions also offer wealth management services and other extras.
A typical credit union only accepts members who live in a specific region or work for an eligible employer. For example, they may require that you’re a resident of Atlanta, Georgia or work as a teacher.
The good news is some credit unions require less and make it easy for just about anyone to join. If you’d like to join a credit union but don’t want to worry about the strict membership requirements at most institutions, you’ve come to the right place.
38 Best Credit Unions Anyone Can Join
There are hundreds of credit unions that anyone can join, but we’ve done the heavy lifting and found the best ones for you. The credit unions below, which are overseen by the National Credit Union Administration (NCUA) may be an option for you, regardless of what you do for a living or where you’re located.
Just keep in mind that you may have to make a donation, join an organization, live in a certain state, or meet some other eligibility requirement. We encourage you to explore this lengthy to list of credit unions anyone can join so you can hone in on the ideal credit union for your unique situation.
1. Alliant Credit Union
Alliant Credit Union made its debut in 1935 to serve the employees of United Airlines. It stands out for it high-interest savings and checking accounts with low minimum opening deposits as well as excellent customer service.
You’ll also receive access to more than 80,000 free ATMs across the U.S. and get reimbursed up to $20 in out-of-network ATM charges per month. Since it only has two brick-and-mortar locations, you should feel comfortable with online banking. If you’d like to join Alliant Credit Union, make a $5 donation to Foster Care to Success.
2. Connexus Credit Union
Connexus Credit Union was founded in 1935 and has a widespread presence in Wisconsin as well as more than 54,000 ATMs across the country. It couldn’t be easier to join the credit union as all you have to do is pay a one-time $5 fee to the Connexus Association, which supports financial education through college scholarships.
As a member, you can open one of its three checking options with high APYs and a traditional savings account or one that’s specifically designed for the holidays.
3. Pentagon Federal Credit Union
Pentagon Federal Credit Union, or PenFed, was founded in 1935 as a credit union for military and civilian government. Today, this Virginia-based credit union has opened it doors to anyone as long as they open a savings account and deposit a minimum of $5. It offers two savings accounts, including the Regular Savings and Premium Online Savings.
In addition, you can find checking accounts, CDs, and money market accounts. Other products include Coverdell Education Savings Certificates, IRAs, credit cards, mortgages, home equity loans, and student loans. Plus, you can enjoy modern perks like mobile check deposits, online bill pay, and instant transfers.
4. First Tech Federal Credit Union
First Tech Federal Credit Union is headquartered in California. The credit union offers many benefits, such as excellent customer service, many branches throughout the U.S. and Puerto Rico, online banking, and mobile banking.
It also has the Dividend Rewards Checking Account, which gives you 1.00% APY on balances below $1,000. You don’t have to live in California to join as long as you donate to a nonprofit called the Financial Fitness Association.
5. Consumers Credit Union
Consumers Credit Union was established in 1951 as a local credit union. Based in Illinois, it’s one of the largest credit unions in the state with over 100,000 members and more than $1.2 billion in assets.
You can join it, even if you don’t live in Illinois. All you have to do is donate the $5 membership free to an affiliated nonprofit. You can open almost all of its accounts online, except for the checking accounts and IRAs. The credit union also offers a high-yield checking account that offers high interest if you meet certain criteria.
6. Langley Federal Credit Union
Langley Federal Credit Union is based in Virginia and made its inception in 1936. At that time, members of the National Advisory Committee for Aeronautics, the predecessor to NASA, chartered the credit union.
Today, Langley offers membership to anyone who pays a fee to support an important cause in Virginia and deposits at least $5 into a savings account. You can choose from a checking account without a monthly fee, a variety of no-fee savings accounts with competitive interest compounds monthly, and Visa Cards with cash back rewards.
7. Lake Michigan Credit Union
Lake Michigan Credit Union made its debut in 1933 by a group of teachers. Headquartered in Grand Rapids, Michigan, it has 51 branches in Michigan and southwest Florida. Since it’s part of the Allpoint ATM network, members can enjoy free access to more than 55,000 free ATM.
To join, donate $5 to the ALS Foundation and deposit $5 into a Member Savings account. Once you do, you can earn perks through the MORE rewards program and redeem them for complimentary checks and free out-of-network ATM transactions.
You may also open the free, no frills Max Checking account. Note that the Member Savings account, which you must open to become a member, requires a minimum daily balance of $300 or you’ll be charged a $5 monthly fee.
8. Lafayette Federal Credit Union
Lafayette Federal Credit Union was founded in 1935 as an alternative to traditional banks. It offers numerous perks, like no minimum balance requirement or monthly maintenance fees, online banking, mobile deposits, free direct deposit, and special discounts.
You can join it if you live, work, worship, or attend school in Washington D.C. If you live outside the D.C. area, you may still become a member as long as you invest in a lifetime Home Ownership Financial Literacy Council (HOFLC) membership for only $10. This nonprofit focuses on helping consumers navigate the path to homeownership.
9. Affinity Plus Federal Credit Union
Affinity Plus Federal Credit Union has 26 branch locations across Minnesota. APFCU offers MyPlus Rewards that gives you points if you keep a certain amount of money in your bank account or use its debit or credit card.
To be eligible to join, all you have to do is donate $25 to the Affinity Plus Foundation and open a basic savings account. If you live and work in Minnesota or have a family member in the state, there are other ways to become a member.
10. Chevron Credit Union
Chevron Credit Union has been around since 1935 and has 19 branches that span six states, including California, Louisiana, Mississippi, Texas, Utah and Virginia. It operates under two brands: Chevron Federal Credit Union and Spectrum Credit Union.
To become a member, join one of its nonprofit partner organizations, such as the Contra Costa County Historical Society. You’ll also need to deposit $25 into a primary savings account and maintain a $25 minimum balance.
Chevron also offers a second chance checking account called New Solutions for those who need help rebuilding their banking history.
11. Ascend Credit Union
Since its inception in 1951, Ascend Credit Union has offered a variety of products, like checking and savings accounts, a money market account, Christmas Club account, youth accounts, credit cards, and loans.
If you’re interested in these services, join The Nature Conservancy, Tennessee Chapter and you’ll be eligible automatically. Note that there is a one-time fee of $25.
12. Hope Credit Union
Hope Credit Union is a black-owned credit union that was organized in 1995 by the Anderson United Methodist Church in Mississippi. You can join if you pay a $10 membership fee and show a foreign passport, permanent resident card, or Matricula Consular. Plus, you may use an ITIN number instead of a Social Security number.
Hope Credit Union provides a number of personal bank accounts, business banking accounts, and transformational deposits. With its transformational deposits, you can participate in socially responsible investing.
13. Boeing Employees Credit Union
Boeing Employees Credit Union, or BECU, was established in 1935 for Boeing employees and currently caters to more than 1 million members. But despite its name, you don’t have to work at Boeing to join.
Its products and services are available to you if you become a member or donor to the KEXP, which is a nonprofit art organization or the Sea Hawkers Central Council. The most noteworthy benefit of joining is the first-time homebuyer grant in which you can receive $7,500 toward your down payment and closing costs.
14. Hiway Credit Union
Hiway Credit Union made its debut in 1931 to serve employees of the Minnesota Department of Transportation. It offers a free checking account with no monthly fee or minimum balance requirements, a free money market account with a $500 minimum deposit, credit cards, and loans.
You can qualify for a Hiway Federal Credit Union membership if you donate to the Minnesota Recreation and Park Foundation for $10 per year or the Association of the U.S. Army, which costs $40 for two years.
15. GreenState Credit Union
GreenState Credit Union was founded in 1938. It provides its members with personal accounts, business accounts, credit cards, loans insurance, wealth management services, and more.
GreenState was named one of the fastest growing credit unions in 2021. As long as you live or work in the state of Iowa, you can become a member and take advantage of its services without any issues.
16. Cascade Credit Union
Cascade Credit Union made its debut in 1952 to serve employees of the Cascade Division of the Great Northern Railway. Today, it’s open to many people and offers great perks like members-only sweepstakes, competitive rates, online banking tools, financial counseling, and group insurance benefits.
If you’d like to join, simply become a member of the Great Northern & Cascade Railway Association (GNCR) and pay an annual membership cost of $40. The credit union can help you fill out your application online or in-person at a local branch.
17. Wildfire Credit Union
Wildfire Credit Union began in 1937 as Saginaw Telephone Employees Credit Union, its original credit union name. Its first location was in the basement of the home of Hank Kosk, the credit union’s treasurer.
After some office upgrades, the credit union opened the doors to its current location on Bay Road in Saginaw and merged with Flint Telephone Employees Credit Union that same year. Today, Wildfire Credit Union offers several deposit accounts as well as personal banking and business banking services. You can join if you live, work, worship, or attend school in Michigan.
18. Nextmark Credit Union
Nextmark Credit Union made its debut in 1958. Its offerings include personal and business checking, home equity loans, personal loans, credit cards, gift cards, and more.
To join, you must live in a qualifying county in Virginia or make a donation to Herndon Elementary PTA, a Title I school.
19. Technology Credit Union
Technology Credit Union, or Tech CU, was established in 1960. It’s based in Silicon Valley and provides its members with no shortage of benefits. These include competitive rates, online banking, access to fee-free ATMs, free credit score monitoring, conference room space, and easy online appointment booking. To become a member, join Financial Fitness Association for only $8.
20. Veridian Credit Union
Veridian Credit Union was established in 1934. Most of its members are those who live or work in Iowa or certain counties of Nebraska. However, it’s open to anyone who is a registered user of Dwolla, a financial technology company. This means you can join as long as you sign up for a personal account at Dwolla.
You’ll also need to open a savings account and deposit at least $5. If you’re already a member of a credit union or bank but would like to switch to Veridian Credit Union, the switch kit may be helpful.
21. Harborstone Credit Union
Harborstone Credit Union’s roots date back to 1955, when it was known as McChord Federal Credit Union and served airmen on the McChord Air Force Base. In 1996, the credit union expanded its membership to anyone in the state of Washington and changed its name as a result.
As long as you live, work, or worship in Washington, you may join Harborstone Credit Union and enjoy a variety of financial products and digital tools.
22. NASA Federal Credit Union
NASA Federal Credit Union began in 1949 to serve NASA employees. Since then, it’s grown to more than 177,000 members. While the credit union is headquartered in Upper Marlboro, Massachusetts, there are 12 branches in Maryland, Virginia, and Washington, DC.
Its product lineup includes a simple checking account with no minimum opening deposit, a savings account with a great rate, and several CDs. You can also monitor your credit score and make deposits with the mobile app. If you don’t work for NASA, you can still join. Simply sign up for a one-year membership at the National Space Society (NSS).
Hanscom Federal Credit Union opened in 1953. The credit union has over 20 branches in and around Boston as well as one in McLean, Virginia. It offers fee-free checking accounts, savings accounts with rewards, credit cards, and loans.
To join, you’ll need to support one of its partner organizations, such as the Burlington Players, a volunteer theater group. In addition, you’ll be required to deposit $25 into a free primary savings account.
24. Pen Air Federal Credit Union
Pen Air Federal Credit Union was founded in 1936 to support civil service employees of Naval Air Station Pensacola. It has 16 locations in northwest Florida and southeast Alabama. You may be surprised to learn that you don’t have to be an active duty or retired military member to join.
You’ll be able to take advantage of Pen Air Federal Credit Union if you become a member of the Friends of the Navy-Marine Corps Relief Society and deposit a minimum of $25 into a savings account. As a member, you can enjoy the Pen Air Platinum Mastercard, Share Savings account with the Round It program, and more.
25. State Department Federal Credit Union
State Department Federal Credit Union was founded in 1935. To join, you can become a member of the American Consumer Council for $8. This is a non-profit organization with a focus on consumer education and financial literacy.
The State Department Credit Union offers a long list of products and services, including basic, advantage, and privilege checking, a money market account, share certificate accounts, individual retirement accounts (IRAs), credit cards, and loans.
26. United Nations Federal Credit Union
United Nations Credit Union made its debut in 1947. As long as you join the United Nations Association of the United States of America, you can become a member.
UNFCU has a vast product lineup that includes a checking account, membership savings account, credit cards, debit cards, and loans, like car loans and debt consolidation loans.
Other membership perks include loyalty rewards, credit card rewards, and the member referral program.
27. Premier Members Credit Union
Premier Members Credit Union was established in 1959 for members of the Boulder Valley School District. You’re eligible to join if you make a donation to Impact on Education, a charity in the Boulder Valley School District, and open an online savings account or youth savings account.
As a member, you can expect perks, such as high interest rates on checking accounts, no monthly service fee, no overdraft fees, and free overdraft protection. The credit union also offers an extensive network of branches and ATMs for your convenience.
28. SRI Federal Credit Union
SRI Federal Credit Union is headquartered in Menlo Park, California. It was founded in 1957 and offers membership to anyone who joins the Financial Fitness Association for $8 per year.
The credit union’s account offerings include a checking and savings account, money market account, IRA, health savings account, and youth, teen, and gradate accounts.
29. United States Senate Federal Credit Union
United States Senate Federal Credit Union has been around since 1935. Its mission is to “improve the financial wellness of members throughout all stages and circumstances of life.” Its products are similar to what most credit unions offer.
As a member, you can enjoy access to a number of checking and credit union savings accounts, mortgage loans, personal loans, auto loans, Visa debit cards, and business advisory services. To join, you’ll need to become a member of the U.S. Capitol Historical Society for $65.
30. Wings Financial Credit Union
Wings Financial Credit Union was founded in 1938 by seven employees from Northwest Airlines. To date, it serves more than 320,000 members with more than $7.5 billion in assets. You can join if you donate $5 to the Wings Financial Foundation, even if you don’t work in the aviation industry.
There are no fees on its basic banking accounts, including its checking and savings accounts, a money market account, and CDs. Its high yield savings and checking accounts offer competitive rates to help you grow your money.
31. Skyward Credit Union
Skyward Credit Union was chartered in 1941. It offers a share savings account with competitive rates, an aim higher checking account with no monthly fees or minimum balance requirements, affordable mortgage and home equity loans.
It also offers online banking, a variety of insurance products, and access to over 30,000 surcharge-free ATMs. Like most credit unions require membership, so does this one. To become a member, join the Kansas Aviation Museum.
32. San Diego County Credit Union
San Diego County Credit Union has been around since 1938 and has over 430,000 credit union members. It’s considered the largest locally owned financial intuition in San Diego.
As a member, you can enjoy a free checking account, secured and unsecured credit cards, a wide range of account options with no service fees, and access to over 30,000 ATMs without ATM fees. To join San Diego County Credit Union, become a member of the Financial Fitness Association.
33. Bellco Credit Union
Bellco Credit Union is a Denver-based credit union that opened its doors in 1936. You can join it even if you don’t live in Colorado as long as you donate at least $10 to the Bellco Foundation, pay a one-time $5 membership fee, and deposit at least $25 in a savings account.
Once you do, you’ll have access to several noteworthy products, like the Boost Interest Checking account, which offers a competitive interest rate, the Premier Money Market Account, and two, no-fee credit cards.
34. Bethpage Federal Credit Union
Bethpage Federal Credit Union was founded in 1941 and currently has over 30 branches across Long Island and New York City. It has a reputation for competitive rates on it money market accounts and certificates of deposit (CDs).
The credit union also offers three checking accounts, a few savings accounts, retirement planning services, IRAs, insurance, and more. You don’t have to live in New York to join if you open a $5 savings account. As a member, you may meet with credit union staff virtually and bank on the go with a handy mobile app.
35. First South Financial Credit Union
First South Financial Credit Union opened its doors in 1957 to serve those on the Millington base. Since then, it has become of the safest financial institutions in the U.S., as stated by independent rating agencies. While the credit union has locations throughout Tennessee and Mississippi, its online banking services make it a suitable option if you live elsewhere.
Like other credit unions, it offers a full suite of checking, savings, CDs, and IRA accounts. To join, become a member of the Courage Thru Cancer Association, which supports St. Jude Children’s Research Hospital.
36. Dow Credit Union
Dow Credit Union was founded in 1937 in Midland, Michigan. It provides numerous products, including checking and savings accounts, certificates of deposit (CDs), HSAs, deposit trust accounts, and loans.
Fortunately, you don’t have to work at Dow Chemical to take advantage of them. To join, make a $10 donation to the Dow Chemical Employees’ Credit Union Endowed Scholarship Fund.
37. Blue Federal Credit Union
Blue Federal Credit Union was chartered in 1951 as Warren Federal Credit Union. If you’re looking for a high-yield checking account, you’ll appreciate its Blue Extreme Checking Account with no minimum opening deposit or monthly service fees.
Other perks include a tiered membership rewards program and round-the-clock customer service. The easiest way to become a member is to donate $5 to the Blue Foundation and open a Membership Share Savings Account with $5.
38. Digital Federal Credit Union
Digital Federal Credit Union (DCU), based in Marlborough, Massachusetts, was established in 1979. Today, it is known for its comprehensive range of financial products that includes checking and savings accounts, auto loans, mortgages, personal loans, credit cards, and wealth management services.
Perhaps one of DCU’s standout features is its commitment to digital banking, offering robust online and mobile platforms that compete with larger, nationwide banks. This makes DCU a fitting choice for those who prefer online banking, no matter where they live.
Membership is open to those who are a part of participating organizations or live, work, worship, or attend school in eligible communities. If you don’t fit those criteria, you can still join by becoming a member of a participating nonprofit organization, such as Reach Out for Schools, which requires a nominal donation.
See also: Best Nationwide Credit Unions of 2023
Bottom Line
Not all credit unions are created equal. Some have strict membership criteria, while others are more flexible. Before you join a credit union (or several credit unions) on this list, be sure to consider numerous factors.
You’ll want to look at eligibility requirements, branch location, monthly maintenance fees, accounts offered, interest rates, mobile banking, digital banking, reputation, and customer service. Best of luck as you explore the best credit unions and search for the perfect credit union.
Frequently Asked Questions
Can civilians join Navy Federal Credit Union?
Yes, civilians can join the Navy Federal Credit Union (NFCU), the largest credit union in the U.S. However, this is limited to immediate family members of service members in all branches of the armed forces. This broad eligibility criteria is one of the reasons why NFCU has grown to be the largest credit union in the country.
Can anyone join American Airlines Credit Union?
No, not anyone can join the American Airlines Credit Union. Membership is limited to those who work in the air transportation industry, including airlines, airports, and related businesses, as well as their family members. While this broadens the scope beyond just American Airlines employees, it still doesn’t include everyone.
The idea of paying your dues, saving up, investing smart and retiring at some point before the “traditional” retirement age of 65 has a strong pull.
For many, early retirement is something that might even happen in their 40s.
If you are considering how you can retire early, here are 3 ideas that can help you reach an early retirement goal:
1. Disciplined Saving and Investing
One way you can build up a sizable nest egg is to practice disciplined investing. Consider how much you will need in your investment portfolio to create an income stream that you can live off of.
You will have to consider your age, how long you are likely to live, and the asset allocation you will need to provide reasonable growth, but not leave you over-exposed to the vagaries of the market. A long-term approach can help you.
If you are 30, and plan to retire by age 50 or 55, you might be able to amass $522,063.08 if you start with $10,000 and invest $1,000 a month for 20 years, assuming a 6.5% return — compounded quarterly — on your portfolio. (Note, though, that returns will vary according to market conditions, and there is always the risk of loss.) You can end up with more than $1 million if you double that to $2,000.
When you start living off your retirement portfolio, though, you will need to make sure you are not withdrawing so much that your nest egg can’t support you. You can maximize your efforts by investing in tax advantaged accounts and making use of your employer’s company match program. But you need a plan, and you need to be disciplined enough to stick with it if you go this route.
2. Cultivate Multiple Income Streams
Another idea for early retirement planning is to begin cultivating multiple income streams, rather than relying solely on your ability to build up a massive nest egg to get you to retirement. Instead, make a plan to pay down your debt (including your mortgage) by your early retirement target date.
Try to rid yourself of as many obligations as possible, so that you will have fewer expenses during retirement. Make a plan to pay down this debt while preparing for the future. Figure out how much money you will need each month to support your retirement lifestyle and then begin cultivating different income streams to create that income.
While there are rules that allow you to begin withdrawing from an IRA early, you likely won’t have access to Social Security benefits during an early retirement. You can consider your early withdrawal from an IRA if you must, but consider other sources of revenue. You can establish a web site that helps you earn residual income, write a book that results in royalties, start a business that can provide an income stream, or even engage in income investing.
It is, of course, possible to cultivate a number of income streams at once, diversifying your income sources. Start now to develop these streams so that they are established and mostly automatic by the time you are ready for early retirement.
3. Take Mini-Retirements
Tim Ferriss, author of The 4-Hour Workweek, made the idea of a mini-retirement somewhat popular. If you want to enjoy life now, and aren’t concerned about having a huge chunk of time to try and kill when you are older, you can plan to take mini-retirements, living in a different place for one to six months. You do have to be willing to quit a job — and try to find a new one — in some cases.
An alternative that appeals to me is having a job you can do from anywhere. I work from home as a freelance writer and I could actually whittle my workload down to a couple hours a day for a few months, and take my job on the road. I’d be living in a state of almost retirement, and it would work as long as I had access to the Internet. Consultants and other freelancers, as well as online entrepreneurs, could make this work. After all, if you can manage to work on reduced hours, and have time to do what you want, you won’t need the same size of large nest egg.
Bottom line: There are even more paths to early retirement, and it might be that you combine different efforts to come up with a method that works well for you. The important thing is to decide what you want to do, and then make a realistic plan to accomplish it.
Last Updated: April 27, 2020 BY Michelle Schroeder-Gardner – 3 Comments
Disclosure: This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links, at no cost to you. Please read my disclosure for more info.
The following is a sponsored post.
Retirement is the most complicated time in your life, financially. That’s driven by many factors, including: (1) you don’t know how long your retirement will last, (2) you won’t have a traditional salary coming in the door, and (3) you might not have the same mental capacities as you do now to make financial decisions.
The complicated nature of retirement has increased over time as life expectancy has increased — from around 60 years in 1930 to closer to 80 years today — and pensions have gone away. Maybe your parent or grandparent has a pension? That pension, which might not seem like a big deal when you’re young, makes a big difference in retirement. It fixes all three issues listed above by providing you a continuation of your salary for as long as you live. Now, not only are employers not offering them, but many of us don’t have traditional jobs with benefits in the first place.
Still, for all of us DIYers out there who know how to take control our financial lives and make things happen, there are solutions for us. To make sure we’re financially comfortable and safe in retirement, we need to be aware of the risks and take the right steps to be protected. This of course means thinking about this and planning ahead years before we expect to retire.
Here are the 4 best tools to keep you safe in retirement:
1 – Social Security (I’m serious here…)
Social Security is the golden child of retirement planning. It is THE BEST option we have out there to keep us safe. It’s basically a pension provided by the government. Here’s how it works: While you’re working and paying taxes, you earn Social Security credits. As long as you’ve earned at least 40 credits (1 credit for every $1,320 you make, max of 4 credits per year), you’ll qualify to receive benefits in retirement. The more credits you earn, the more your benefit, which is a monthly paycheck in retirement, will be. That monthly check can start between ages 62-70 and will continue for life, each year potentially increasing for inflation. The longer you wait to start it, the more your benefit will be.
To take full advantage of Social Security, do the following:
Maximize your credits by making sure your reported taxable income is at least $5,280 every year. (This number is based on the 2018 credit value of $1,320 which does go up over time.)
Plan to delay the start of your Social Security to the maximum age of 70. You’ll get an 8% increase in your benefit each year you delay them past full retirement age (67).
Keep track of your Social Security benefit by creating an account. Knowing how much you’ll be receiving each month will make it easier for you to plan how you’ll cover the remaining expenses that exceed your benefits.
2 – Blueprint Income’s Personal Pension
Employers have decided to stop offering pensions, instead providing better access to the stock & bond markets through 401(k)s. But, you can still get yourself the benefits of a pension — steady, guaranteed income that continues for life — independent of what your employer offers. Blueprint Income’s Personal Pension is an account you create and fund just like you fund your 401(k), IRA, or brokerage account. But, instead of putting money in the market, the money in your Personal Pension gets converted into guaranteed, lifelong income backed by insurance companies, of which Blueprint Income has 15 on their platform. (The technical product that makes this possible is called an income annuity, which is what the first generation of pensions used.)
Use the Personal Pension to supplement your Social Security so that all of your most important expenses in retirement will be covered no matter how long you live, and even if the market crashes. Here’s what to do:
Head to Blueprint Income to build a Personal Pension plan. You can set a goal for how much income you want in retirement and they’ll tell you how much to put in over time.
If you have an idea of how much your basic expenses will be in retirement, use that minus Social Security as your income goal. If you don’t know, just set it at $2,000 per month and work with their time to refine it later.
Decide where the money to open the account will come from (minimum of $5,000). You can use existing retirement savings (Traditional IRA, Roth IRA, 401(k) rollover) or new savings from your bank account.
Then, keep contributing over time as little as $100 per month to build up your retirement check. If something happens, you can always skip/cancel/change contributions without penalty.
3 – Tomorrow, The Family Financial Planning App
The first two tools protect you from the risk that you live longer than expected and the risk that the stock market crashes. But, what will happen when you pass away? Not only is that emotionally challenging for your loved ones, it can also create very complicated financial situations for them. The Tomorrow app provides a super easy and user-friendly way to make important long-term financial decisions and set up appropriate wills and insurance contracts.
Here’s what you can do through the Tomorrow app:
Create a last will & testament for free. Having a will is important because it specifies who will be the guardian of your kids and pets and specifies what should happen to your assets.
Create a trust fund, which when paired with a will, has the benefit of protecting your privacy, reducing probate costs, and allowing for better distribution of your assets.
Determine and buy the right amount of term life insurance. This is the simplest form of protection for your family over the period of time that a premature death would harm them financially.
4 – EverSafe, Protection from Fraud, Scams & Financial Exploitation
At the beginning, I mentioned that retirement becomes a risky time in your life because of your potentially diminished cognitive capabilities. This reality makes seniors easy targets for financial abuse and exploitation. Elder financial abuse can take many forms, including petty theft, fraud, scams, misguided home repairs and bad financial advice. EverSafe is a personal detection and alert system that stops exploiters from taking advantage of you.
Consider signing up for EverSafe as you approach retirement, or for your loved ones who are already in retirement, to get the following services:
Analysis of your daily transactions for erratic activity and anomalies like unusual withdrawals, missing deposits, etc.
Alerts by email text, or phone to you and your trusted advocates when suspicious activity occurs.
Tools to manage and resolve any fraudulent activity.
With these tools, plus all of the good day-to-day and long term financial sense I know you already have, you’ll set yourself up for a comfortable retirement where, ideally, you never even have to think about money or risk!
The Roth 401(k) may appeal to workers willing to forego a tax break now in return for getting one at retirement. As its name implies, the Roth 401(k) combines features of a traditional 401(k) with those of a Roth IRA. If you have access to both, which one is best for you? Let’s take a closer look at a Roth 401(k) vs. the traditional 401(k).
Like a traditional 401(k), workers enjoy the convenience of contributing through payroll deduction. But similar to a Roth IRA, contributions are made on an after-tax basis and withdrawals after age 591⁄2 are tax free and penalty free for workers who have maintained their account for five years. There is also a Roth 403(b) plan for workers in the nonprofit sector.
How a Roth 401(k) Works
The Roth 401(k) follows many of the same rules as a traditional 401(k). For the 2010 tax year, federal laws permit a maximum annual contribution of $16,500, although your employer may impose a lower limit. Your employer may provide a matching contribution as part of a Roth 401(k) offering, although you will be required to accept the matching contribution in a traditional, and not a Roth, account. If you are age 50 or older, you may contribute an additional $5,500 for a total of $22,000 in 2009. You may continue to maintain a traditional 401(k) while directing all or a portion of new contributions to a Roth 401(k). Your contributions to a Roth 401(k), however, are irrevocable—once made, they cannot be transferred to a traditional 401(k) account and funds in a traditional 401(k) cannot be switched to a Roth 401(k). Both Roth and traditional 401(k)s require distributions after age 701⁄2. There is a 10% penalty for early withdrawals prior to the age of 591⁄2, and taxes may apply for traditional IRAs.
Planning for Retirement
Choosing Between Traditional 401k Vs. Roth 401k
A Roth 401(k) may present a significant benefit when it’s time for retirement—the funds can be rolled over directly to a Roth IRA with no tax payment. Assets in a traditional 401(k) can now be converted to a Roth IRA, but the conversion requires you to pay taxes on the portion of the rollover that has not yet been taxed.
To Roth or Not to Roth?
If you’re considering a Roth 401(k), you may want to review the following points before making your decision:
Although future tax rates are difficult to predict, you may benefit from a Roth 401(k) or 403(b) if you anticipate being in a higher tax bracket during retirement.
Even if your marginal tax rate remains relatively stable, you may face a higher tax bill in retirement if you will no longer claim deductions for dependents, mortgage interest and others frequently utilized by families. If this sounds like a likely scenario, a Roth 401(k) may be to your advantage.
Will you need your retirement assets for living expenses during your later years? If not, a Roth 401(k) offers the opportunity to roll over funds directly to a Roth IRA, which does not require distributions after age 701⁄2. This situation may enhance the potential tax-free growth of your assets and enable you to bequeath a larger portion of your assets to your heirs.
You are not required to meet income thresholds to participate in a Roth 401(k). In 2009, Roth IRAs are limited to single taxpayers with $120,000 and married couples with $176,000 or less in adjusted gross income. A Roth 401(k) may have some appeal if you desire tax-free withdrawals but your income exceeds the threshold for a Roth IRA.
The longer you remain invested in a Roth 401(k), the more you are likely to benefit from tax-free growth. If you plan to retire in five years or less, a shorter-term time horizon may limit the benefit of tax-free withdrawals, whereas your account may get a bigger boost from tax-free savings if you plan to continue working for a longer period of time.
Capitalizing on every option available to you may make it easier to pursue your long-term savings goal. If tax-free withdrawals could potentially benefit you and your employer makes a Roth 401(k) available, consider adding it to your retirement planning mix.
Points to Remember
A Roth 401(k) offers the option of investing for retirement on an after-tax basis. In return for foregoing a tax deduction when the contribution is made, participants are able to make withdrawals free of penalties and income taxes during retirement.
Workers may elect to make all or a portion of their 401(k) contribution to a Roth 401(k). Once made, however, a contribution cannot be transferred to a traditional 401(k) and assets in a traditional 401(k) cannot be switched to a Roth 401(k).
The annual maximum contribution for 2009 is the same as for a traditional 401(k): $16,500 plus an additional $5,500 catch-up contribution for employees aged 50 and older.
Employers who provide a matching contribution are required to allocate the match to a traditional 401(k), not a Roth account.
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Just because you retire doesn’t mean you have to stop working. And when work is an option rather than a requirement, it’s possible to select a low-stress job that multiplies fulfillment without adding anxiety — but still provides a bit of much-appreciated income. There are, in fact, a variety of such low-stress, high-reward jobs well-suited to the needs of retirees.
A financial advisor can help you devise a plan that will give you the flexibility to make choices in retirement.
Working in Retirement
People may continue working after retirement for a variety of reasons, including the benefits of generating additional income, the satisfaction of making a contribution and the stimulation of staying engaged. If nothing else, work can get them out of the house and fill the hours formerly devoted to their careers.
Many jobs are, however, likely to be more trouble than they are worth to a typical retiree. If what you are after is fulfillment without stress, it doesn’t make much sense to apply for a position as, say, a law enforcement officer working undercover for a drug-smuggling ring. Fortunately, there are many jobs that offer lots of benefits without lots of stress.
Low-Stress Jobs for Retirees
The work you do in retirement can be an extension of your former career or head off in a diametrically opposed direction. Either way, here are 12 possibilities:
Tutoring
Decades of life experience can admirably equip retirees to work as part-time tutors to students at various levels of education. English as a Second Language, for example, is a subject area many retirees can assist students with, while maintaining flexible hours and keeping supervision and red tape to a minimum.
Pet Care
For people who like getting outside and spending time with animals, walking dogs is a way to get paid for enjoying themselves. Sitting, grooming and transporting dogs as well as cats and other pets can offer similar appeal.
Massage Therapist
Many massage therapists see clients at their own homes or in annexes on the property, meaning there’s no commute and little hassle or overhead. If you enjoy helping others through the healing properties of touch, this could be a retirement gig for you.
Personal Trainer
A dedicated runner, swimmer, biker or gym rat, can get paid for sharing their knowledge and passion for fitness with others who are chasing their own fitness goals. Tasks include selecting exercises, structuring workouts and developing training plans.
Consultant
If you had a lengthy career in nearly any knowledge-based field, you may be able to monetize that experience in retirement while also being able pick and choose your clients, working flexible hours and even earning a handsome income, all as a self-employed consultant to businesses.
Life Coach
If helping individuals as opposed to businesses is more your style, you can set yourself up as a life coach helping people reach fulfillment by attaining goals in their professional and personal lives.
Travel Agent
Many who love to travel find earning fees and commissions as travel agents to be a good job in retirement. The work involves recommending destinations, organizing itineraries and booking tickets for transportation, lodging, meals and events.
Library Worker
Bibliophiles can surround themselves with books and get paid for the privilege by working at the library. Many positions are part-time and tend, almost by definition, to be low in noise, hustle and bustle.
Tour Guide
Museums, historical sites, nature centers, monuments and other attractions commonly employ guides to provide visitors with information and assistance as they tour the facility. The positions are well-suited to retirees who want to make some extra money and interact with a variety of people in a relaxed environment.
Personal Shopper
Retirees can shop until they drop without having to spend a dime of their own money – and even earn a few bucks – by working as personal shoppers. This job involves serving people who need help choosing clothing and accessories that fit their personal styles.
Landscape Artist
Cultivating b eautiful landscapes is a passion for many retirees. A peaceful day tilling the soil can also be a source of income with a job as a gardener or landscaper.
Event Coordinator
If you possess robust organization skills and are detail-oriented, there is always a demand for people who can plan and coordinate weddings, parties, conferences and other events.
Bottom Line
Although there probably are as many reasons for continuing to work after retiring as there are working retirees, it’s a safe bet that few if any are showing up for work in search of added stress. Fortunately, there are plenty of jobs open to retirees that pair high levels of fulfillment with low levels of stress.
Retirement Planning Tips
Generating sufficient income in retirement can be a challenge without the help of an experienced and qualified financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether you are retired and working mostly for non-financial means or still in the workforce and focused on earning income, SmartAsset’s paycheck calculator will tell you how much your employer will withhold from your check for federal, state and local taxes.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
Are you wondering about how much you’re going to need saved for when you retire?
It’s a common question that a lot of people have, young and old. Some of the more common variations that I get on this question are, What is the amount of income that I’m going to need in retirement? or, How do I figure out what my retirement income needs are going to be?
It’s a tough question, but the toughest part about answering it is that there is no clear cut answer. There is no universal formula, some general mathematical rule of thumb, or some magic number that you need.
Your retirement income needed all depends on your unique situation.
And that is what makes financial planning an ongoing process. It’s not just a one time, quick, snap-shot solution where, “Okay, bam! This is how much money you’re going to need and you’re all good.” Here are a couple of the different items that you need to consider when you’re trying to figure out what your retirement income needs are going to be.
Pay Your Bills
First and foremost, you have to figure out what are your needs are, meaning how much do you need each month to pay the bills? How much do you need to take care of your health insurance or if you still have a house payment, if you still have debt, if you want to do vacations? It all comes down to trying to identify that. That’s tough for a lot of people, because a lot of us do not budget. A lot of us don’t have a good sense of knowing exactly where our money is going each month. If you don’t have a good handle on your budget, then trying to identify your income need is almost impossible.
How do you do it? You can try to shoot from the hip, which a lot of my clients try to do. But I make them go home, sit down and start looking at where all their money is going per month. What are the things that they have to have each month to buy? Without doing that inventory, without doing that research into their own lives, it makes it tremendously difficult to try to figure out what their retirement-income needs are going to be. That is the first step and, I assure you it’s probably the hardest because a lot of people don’t do it. They just don’t take the time to figure that out.
Show Me What You’re Working With
The second step is that you have to figure out what you’ve got to work with:
How much have you saved?
How much do you have in your 401K?
How close are you to receiving social security?
Do you have any pensions?
All those factors come into play when trying to identify what your retirement-income needs are going to be. For example, I have clients who actually go back and figure out what their income need is as far as paying the monthly bills and having a little extra to play and do the things that they want to do, so that gives us a sense of where we need to be. Then we take a look at what they’ve got.
Have they retired early?
I have some clients who retire at 55, 58, 60 so there is a little bit more pressure on their retirement assets, their 401Ks, their pensions to be able to get them that retirement income. We don’t have social security to lean on, so that requires a little bit more creativity. I have other clients who retire after social security age. Some take early retirement at 62, or some continue to work until they are 65 (or 66). When we have that extra paycheck coming in per month, that gives us a little more freedom and flexibility to try to decipher what the income might be.
That’s why it’s so tough. It’s not a clear cut answer. You hear a lot of general rule of thumb where whatever 70%-80% of your current income in your working years is how much you’re going to need in your retirement years. Sometimes that is the case, but sometimes it’s not. Going back to the income needs, what about health insurance? Is that something that you’re going to have, or are you already on Medicare so it’s not that much of an issue? There are a lot of factors like that that come into play.
Let’s Be Real
The other thing is just being realistic as far as your spending expectations. I have some clients who come to me, and we do all this planning to where we’ve got everything lined up. We’ve identified their needs. We have all their retirement information together, so we’ve identified how much they are going to be drawing out per month. Then a few months into it, they get a little spend happy, and they start wanting to buy things, buy “toys”, do this, take trips.
All of a sudden, they are causing a strain on their retirement portfolio, so we have to have a come-to-Jesus meeting and I address the issue,
“Hey, this was the plan when we first started, now why are we deviating? Why are we all of a sudden buying things that initially weren’t on our plan?”
You just have to be very conscious of that. I don’t want my clients to think they can’t spend their money. It is their money. They worked their whole life to have that, but you have to be careful. You have to be cautious and just be very aware of how much you’re spending and how fast you’re spending it.
One of the most important components of creating a retirement plan is having an accurate evaluation of yourself and just knowing your habits, and how things may be as soon as retirement comes.
Retirement: The Early Years
Going back to that rule of thumb as far as the 70%-80%, typically what I’ve seen is this: In the first couple years of retirement, it’s like the kid who has been stuck in class all day long and it’s sunny outside. They’ve been looking at the playground. They can see the sun. They see the jungle gyms. They’re ready to be set loose, and they want to go play and be free.
That’s what it’s like for many of my retiree clients: once they hit retirement, they’re like that kid who’s been set free. They’re out on recess. They get to play, get to do these things they’ve been waiting to do for so long. They’re ready to go. They’re ready to play and have fun, so those first couple of years they’ll spend a little bit more doing the trips that they want to do, buying the toys that they’ve put off for so many years. Now they feel that they’re entitled to do that, and they are, so let them do it.
Then as they get older, as maybe health conditions don’t allow them to do the travel as they did when they first retired, they’ll tend to spend a lot less than they did in their first years. Whereas the first couple of years maybe you do fall in that rule of thumb of spending the 70%-80% of your working-years’ income, but after a certain point you don’t travel as much because you’ve done everything you wanted to do and are just content to stay around home spending time with the grandkids and just doing a lot of staycations where you’re just enjoying that time with your family. Thus, you’re not spending nearly as much, and it kind of balances out.
Get Your Best Retirement Income Possible
Those are some of the steps that you need to do in the beginning as far as first, identify what you’re actually going to need per month to live off of, to spend, to do the things that you have to do just to get by. Then, you’re going to need to identify what you’ve got to work with, with your 401K and your savings and pensions and when social security is going to play in. Then finally, you just have to know yourself and know your spending habits and how that’s going to affect your income in your retirement years.
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Retirement is a massive financial undertaking. But it’s also more flexible than many people believe. At different stages in life, it’s really possible to retire earlier than you might realize. However, retiring at age 30 with $1 million comes with a lot of leg work and a bit of luck. It’s not impossible, but a lot of things have to go right for you. We’ll discuss what to consider.
A financial advisor can help you put a financial plan together for your retirement needs and goals.
Your Retirement Income With $1 Million
The $1 million is a common benchmark for FIRE advocates, which means “Financial Independence, Retire Early.” The basic philosophy is this: Maximize every penny of earnings early in life. Save hard, spend little and invest wisely. Then, ideally sometime before age 40, have enough cash to retire for good.
The trouble is that $1 million does not actually generate that much secure income in retirement, at least not before you can supplement it with Social Security. The rule of thumb used by most financial professionals is that you should expect a 4% drawdown each year.
This means that for a sustainable retirement, you should budget to live on about 4% of your total retirement portfolio. For a retiree with a $1 million portfolio, this comes to $40,000 per year.
We can also adjust up from 4%, given that it is admittedly very conservative. So you can hit that number holding nothing but bonds and getting no returns beyond simple coupon payments. So take a number like 6%. This gives you an annual income of $60,000.
Now, that’s not nothing. According to the Census Bureau, it’s less than the median income of $70,700. But not by that much. The problem is that you need to live on that money for a long time.
Costs of Retirement In Your 30s
When the New York Times wrote on this subject, they profiled a man who retired at 43 on his $1.2 million savings. The man’s wife still worked, supplementing the household’s budget significantly. Even still, the article wrote, the couple lived a life, “Rich on time but short on luxuries: Groceries are bought at Costco, car and home repairs are done by him.”
This is the problem with retirement in your 30s. The odds are that it leads to a lot of sitting around asking, “Now what?”
3 Tasks to Solve
First, you will have to account for all the basic expenses of life: Housing, food, utilities and more all add up.
If you have collected $1 million at age 30, the odds are good that you live in or around a city, where the higher-paying jobs are located. For example, if you live in Washington D.C., rent alone can consume almost an entire $40,000 income. And if you move, that will mean leaving your friends and connections, as well as an entire lifestyle that you have presumably come to enjoy.
Second, there are the employment-related expenses of life. Mostly this means finding your own health insurance. At age 30, you might be able to get away with a cheaper high-deductible plan, but as you age into your 40s and 50s that will be increasingly less of an option.
Third, there are situational costs. If you have children, they will need their own care and feeding. According to SmartAsset’s 2023 study, raising a child can cost up to $30,000 annually in the U.S. And as your parents’ age, they might need care both personal and financial.
And unexpected expenses crop up on a regular basis. Home and auto repairs aren’t always do-it-yourself (DIY) projects, for example. If your car throws a rod or (to cite this writer’s experience) a four-story elm dies in your backyard, that’s thousands of dollars directly from your own pocket.
What to Look Out for at Age 30
At age 30, you have a lot of time and responsibilities ahead of you. Every retiree needs to plan for the unexpected. But when you’re a young adult, far more people will count on you and you will have far fewer resources.
Medicare and Social Security won’t kick in for several years. And Medicaid won’t help someone who is voluntarily unemployed. Family members will look to you for support, property will need tending and many of life’s biggest expenses may still be on their way.
To put it another way, you’re not a kid anymore and there is no backup plan. For the next 30 or 40 years, you are the backup plan. By retiring this early with this budget, you are planning to face that with virtually no room for error.
The FIRE Lifestyle
There is a very good reason that early retirement has caught fire (or FIRE) in recent years. Work for millennials and, as they age in, Generation Z, is worse than it was for past generations. Employers expect ever-longer hours and make ever-broader demands.
For Baby Boomers and Generation X, it can seem bizarre to plan on leaving the workforce by age 40. In large part, though, that’s because theirs was a generation that still got to clock out at 5 and only worked on the weekdays.
“The rule books our parents have given us is advice that’s perfect for 1970,” wrote the New York Times in one representative quote. “We have to throw out that rule book and write a new one.”
Current generations were brought up in an era where every job has been migrated to salaries to avoid overtime pay. And most days end well after 5:00 p.m. This is a working world of smartphones, seven-hour half-days and “just real quick” Saturday assignments. It’s easy to understand why so many young workers want to opt-out.
Considering the Alternatives
Consider the other side of that lifestyle carefully, because you may not be buying yourself the freedom that you think. You will have freedom from burning out on work culture and the stress that comes from expecting work e-mails at all hours of the day. But you may not have the freedom to for very long.
In other words, you may not have the freedom to live the kind of lifestyle that you want to enjoy. If you have a home, you may not be able to afford anything else. On a $40,000 – $60,000 per year budget, there probably won’t be much left for travel, dining and other luxuries.
Your plan might be Netflix and dinner for a long period of time, for example. If, as many young retirees do, you choose to travel, then those temporary travels may become more permanent than you’d think.
Bottom Line
Is it possible to retire at 30 with $1 million? Yes. But the odds are it’s likely that it will do more harm than good. If you have $1 million at age 30, you’re doing beyond great. If you keep this money in a series of solid, comfortable investments, then you almost certainly can retire early. The truth is, you probably can target retiring at age 40 or 45. Give this account another 10 years or so to ride. And let compound growth increase over time.
Retirement Planning Tips
A financial advisor can help you prepare for an early retirement. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Want to see how much your 401(k) will be worth when you retire? Use SmartAsset’s free calculator.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Take these steps to protect your retirement savings from a crash without sacrificing your family’s needs today.
January 27, 2023
When you’re in your 20s and 30s, retirement can feel pretty far away. You know it’s important, of course, but it’s not always top of mind. Add in the fact you’re dealing with the immediate challenges of a recession and it can be even easier to let your retirement planning slide.
But there are plenty of reasons to prioritize retirement. The good news is you can do so without putting your other priorities at risk. That’s especially important for parents, who have a lot of financial obligations—to put it mildly. In addition to funding retirement, covering the rent or mortgage and paying bills, they have financial goals for their families, such as saving for college and ensuring the kids can participate in extracurriculars.
Striking this balance while prioritizing retirement is especially important for millennials, many of whom have a way to go on their stockpile. While 8 in 10 millennials have money saved for retirement, nearly half have saved less than $10,000, according to a report by the Insured Retirement Institute. Luckily, retirement planning is a marathon and not a sprint, so these young savers still have time to retire comfortably with consistent retirement contributions.
Looking at both their budget for today and their future goals, many parents are asking: How do I protect my retirement savings during a recession while also saving for my family?
Keep your retirement savings goals front and center
To be honest, it can be kind of overwhelming to juggle all of these priorities while managing your 401(k) during a recession. Focus your attention by starting with your “why.”
Amy Blacklock, co-founder of financial blog Women Who Money, recommends you create a family financial mission statement to clarify your values and priorities. This statement should describe why your family is pursuing particular savings goals and how you’ll get there.
“If you know what your mission is for your family and yourself, it will help you stay on track when other things come up.”
Start a conversation with your family to determine your priorities and values. What you decide will then form your family’s mission statement. For example, a family may craft the following statement after talking about their goal of budgeting for retirement, Blacklock says:
“Our family’s financial mission is to save for a financially secure and fulfilling retirement. We will focus on annually maxing out our IRA contributions. We also aim to teach our children the ins and outs of money. We will steadily increase our retirement savings contributions so we may retire at age 60.”
By including objectives in your family’s mission statement, you will be regularly reminded of their importance, even as you deal with the challenges of protecting your retirement savings from a recession. Having clear objectives in place can help you stay focused on your goals, which is particularly important when you’re protecting your IRA or managing your 401(k) during a recession. It’ll also help you avoid the temptation to divert funds to other expenses, such as a bigger house or new car.
“If you know what your mission is for your family and yourself, it will help you stay on track when other things come up,” Blacklock says.
Remember why it’s important to protect your retirement savings from a recession
Your financial mission statement will help you keep a long-term perspective. This is essential for millennial parents, many of whom have lived through two recessions in their working lives.
Given that rocky past, millennials tend to have less wealth today than previous generations did at the same age, the Pew Research Center notes.1 The center found that the median net worth of households headed by millennials (ages 20 to 35 in 2016) was about $12,500, compared with $20,700 for households headed by boomers the same age in 1983. Gen X households at the same age had a median net worth of about $15,100. This disparity underlines the importance of protecting your 401(k) in a recession.
Andy Hill, founder of the blog and podcast Marriage, Kids and Money, learned this lesson first-hand during the Great Recession. During the housing crisis and subsequent 2008 recession, Hill owed $180,000 on his home mortgage, but the house’s value had sunk to $110,000. Getting out of that underwater mortgage required him to temporarily decrease funding to other financial priorities, including retirement.
“If you’ve been through a recession and you’ve been impacted, then you’re going to remember it,” he says. “I certainly did.”
For millennials like Hill, personal experience with a recession has prepared them for future challenges. They know how important it is to help protect your retirement savings from a crash.
While funding your retirement may seem like a long-term goal for you and your spouse, it actually helps your kids, too. “You have to take care of yourself first, or you run the risk of not being able to and sticking that responsibility on others later,” Blacklock says. When you put the burden on your children to support your retirement later on in life, they’re forced to divert the resources that they need to prepare for their own later years, she adds.
After all, while saving for college or a home is important, these costs can be funded through other means. For example, your kids can pay for college through scholarships, work-study programs or loans. But the same can’t be said for your expenses after you leave the workforce, Hill says.
“There are no retirement scholarships, unfortunately,” Hill notes.
Reduce your spending before cutting into retirement savings
When you’re in a recession, tough choices are inevitable. You may wonder: How do I protect my 401(k) in a recession while also paying my bills? With your financial mission statement in place and your reasons for saving top of mind, you can make these decisions with confidence.
Start by assessing your current situation. Did you or your partner lose your job, or take a hit to your income? It’s a scary situation, but avoid a knee-jerk response rooted in fear. Instead, review your current income and expenses to see where you can adjust your budget.
Take a look at your current spending. Housing, utilities, insurance, food and transportation all likely fall into the “need” category, while things like streaming service subscriptions, restaurant meals and gym memberships go into the “want” bucket.
“You need to cut out everything that is not a need to keep your family going,” Blacklock says. It won’t be easy, but remember that the pain of austerity won’t last forever. “As soon as your income increases, you can start adding things back in.”
Try paring back your spending to the essentials. If you can keep contributing to your retirement savings at the current rate after trimming your spending, that’s a smart way to go, Hill says.
For families still falling short, it may be time to tap into emergency savings to cover your essential expenses. Using your emergency fund to pay your bills can help prevent you from dialing back your retirement contributions. And it’s definitely a better bet than withdrawing your retirement savings, Hill notes.
For one thing, you’ll likely face early withdrawal penalties if you pull out your retirement savings early, Hill notes. That $50,000 in your 401(k) may look like a good chunk of change, but it’ll be partially eaten away by fees and taxes, he cautions. And just as importantly, removing that cash now can dramatically reduce your total savings in the future.
You can use a compound interest calculator to determine your specific return—and how it would be affected by pulling out your funds prematurely. For example, if you have $50,000 in your retirement savings today and plan to contribute $100 per month, your savings will total $494,000 in 30 years, assuming a 7% annual return. But if you take out $40,000 to spend now, leaving just $10,000 in the account, you’ll see a much different result. Even if you keep contributing $100 a month, your total savings will only hit $189,000—less than half the amount if you’d kept your retirement savings in place.
If you can keep contributing to your retirement savings at the current rate after trimming your spending, that’s a smart way to go.
When it comes to managing your 401(k) during a recession, that’s a strong incentive to keep your savings where they are. But in the end, you have to make the decision about what’s best for you and your family. If you’ve already cut your budget down to needed expenses, tapped into your emergency fund, researched new ways to make money and reduced your retirement contributions, well, you may consider withdrawing contributions from your Roth IRA or borrowing from your 401(k), Hill says. Just be sure you’ve exhausted all those options.
“If you’re in a dire situation, you’ve got to do what you’ve got to do, but there are so many things to do before you even consider that,” he says.
Don’t overreact to the markets when managing your 401(k) in a recession
Even when you have your goals top of mind, it can be tempting to respond to market volatility by taking some sort of action, whether it’s withdrawing your funds or selling stocks to protect your retirement savings from a crash. But Hill recommends resisting that urge.
“There’s lots of swings, ups and downs, and they can be uncomfortable, but they’re not abnormal. This is reasonable volatility in the market. And in order to be a long-term investor, you have got to keep riding the roller coaster,” Hill says.
In other words, even if the market goes down, you can count on it eventually going back up. But you don’t want to miss out on that rise by prematurely withdrawing your funds. It’s important to keep your hands off your retirement savings to avoid locking in losses, but it also prevents triggering potential fees and unwanted tax implications.
“If you withdraw early or you sell, it’s going to be a lot more difficult to achieve those long-term retirement savings goals,” Hill says.
Whether your savings are in a 401(k) through your employer, an IRA account or stocks you manage on your own, there’s a big incentive to keep them in place: the opportunity for compound growth.
“By leaving your retirement savings alone, you’re allowing it to grow and you’re allowing your money to make money on itself,” Blacklock says. “The longer it’s invested, obviously the more money you’ll have.”
Create a plan for rebalancing your portfolio
As you think about how to protect your retirement savings from a crash, you may be tempted to rebalance your portfolio given the ups and downs in the stock market. But it’s important to keep yourself from taking any abrupt action, Hill says.
“By leaving your retirement savings alone, you’re allowing it to grow and you’re allowing your money to make money on itself.”
Ideally, you should already have an investment policy statement in place that outlines how often you rebalance your portfolio, Blacklock says. This way you’ll know that on a regular cadence, say every six months, you’ll review the investments with your advisor to determine if you need to make any changes to your strategy.
If you don’t have this plan, now can be a good time to create one. Work with your financial advisor to assess your mix of stocks and bonds. That said, don’t try to rebalance on a faster scale than you’d initially planned for, Hill says, as you don’t want to overreact to market volatility. You want to keep a level head when protecting your 401(k) in a recession. In partnership with your advisor, keep a long-term perspective.
“Always, always, always work with your trusted financial advisor and make those decisions together,” Hill says.
Don’t let a crisis derail your long-term goals
Between job losses and uncertainty in the markets, it can be tempting to make rash decisions during a recession. But if you take a deep breath, assess your finances and reflect on your options, you can determine your next step with care.
For parents, that means finding a way to keep supporting your family while also prioritizing your long-term financial goals, including retirement. Protecting your retirement savings from a recession is the smart thing you can do, both for yourself and for your family.
Now that you know how to protect your 401(k) or other retirement savings in a recession, check out these top retirement savings mistakes to avoid.
1 “Millennial life: How young adulthood today compares with prior generations.” Pew Research Center, Washington, D.C. (January 30, 2019) https://www.pewresearch.org/social-trends/2019/02/14/millennial-life-how-young-adulthood-today-compares-with-prior-generations-2/
Save more, spend smarter, and make your money go further
Finances are often talked about like some enigma that can’t be cracked unless you’re an accountant, investor, or a CFO. In fact, according to a study from Statista, only 25% of respondents said they considered themselves to be very financially literate, while 4% said they were not financially literate at all.
But the stigma around financial expertise has got to go! By using your resources and taking charge of your own financial standing, you can make a difference in your own life and even inform friends and family who are struggling to manage their own finances.
One of the best ways to glean financial knowledge is to read about it. From financial news and our #RealMoneyTalk series, to the best finance books of all time, there are plenty of opportunities to learn more about your money. Whether you’re looking to boost your budgeting skills, try your hand at investing, or want to learn how to save for retirement, you’re in the right place.
In this post, we’re discussing the 16 best financial books of all time. From books by spunky financial advisor Suze Orman to finance books specifically for millennials, there’s something in here for anyone who wants to strengthen their financial prowess.
Looking for a quick book recommendation? Use the links below to skip ahead, or read end to end to get the most out of our comprehensive list of the best finance books of all time.
Best financial books by category
To help you find the right book for your financial needs, we’ve broken this list down into 7 categories, with some of the best book selections in each.
Best financial books for all readers
Whether you’re just opening your first credit card or you’re trying to figure out how to start a budget, there’s a lot to learn in the finance world. But pick up the most recent issue of the Wall Street Journal as a finance novice, and you might feel a little lost, to say the least.
Before you dive into market trends and economic policy, it’s a good idea to establish some foundational knowledge first. Our list of the best financial books of all time in the general category include titles that encourage changing your perspective on money, to a book that gives a cynical yet informative run-down of the top financial terms consumers need to know.
Nudge: Improving Decisions About Health, Wealth, and Happiness
In addition to providing advice on finances and wealth, Nobel Prize winning author, Richard H. Thaler tells readers how they can shift their decision-making skills in all facets of life including health and happiness.
Thaler and co-author Cass R. Sunstein include rich behavioral data to look at how humans make decisions and how they can improve their “choice architecture” to avoid investment mistakes, unhealthy habits, and even relationship faux pas. If you’re in search of a new perspective to help you better manage your finances and related decisions, Nudge could be just the push you need to take hold of your personal finances and start meeting your financial goals.
The Power of Habit: Why We Do What We Do in Life and Business
If you’ve tried budgeting before and you just can’t get it to stick, it could be time to take a closer look at your habits. In his New York Times bestselling book, author Charles Duhigg examines how people create habits and how we can change them.
Duhigg backs his methodology in The Power of Habit with scientific research and anecdotes that readers can apply to their own lives, whether it’s changing financial habits or learning how to be more productive in work and in life.
The Devil’s Financial Dictionary
One of the biggest roadblocks in financial literacy can be connected to the complexity of the financial jargon and processes we see on the news and in blogs. But in the name of readability, author Jason Zweig brings these convoluted terms back to earth with witty definitions that Wall Street executives and financial amateurs alike can appreciate.
If you’ve ever felt like the finance world is too pompous or complex for your liking, you’re certainly not alone. The Devil’s Financial Dictionary demystifies everything from Wall Street lingo to general terms you can apply to your everyday life.
Best financial books for retirement
Preparing for retirement is an exciting time. You’ve worked much of your life building your career and saving up money, and now it’s time to start catching sunsets instead of chasing deadlines. But as you’re preparing for your sunset years, a lot of questions tend to arise.
How much money should I have in my 401k? Can I really afford to retire? When can I access the money in my retirement fund?
Sound familiar? You’re not alone—a lot of new and upcoming retirees have experienced the same woes as they plan for life after work. But the good news is, some of the most successful finance experts and authors in the world have taken to this topic to provide consumers with the answers they need as they approach retirement.
With that said, here are some of the top finance books for retirement planning:
You’ve Earned It, Don’t Lose It
You probably recognize her spunky personality and hard-hitting financial advice from the Oprah Show and Dr. Oz, but applying her advice directly to your personal finances is a revelation all on its own. In her book You’ve Earned It, Don’t Lose It, author and financial advisor Suze Orman discusses exactly what consumers need to know as they’re prepping their finances for their upcoming retirement.
From choosing trusts vs. wills to maximizing retirement income, Orman’s national bestseller is nothing short of a complete guide to retirement planning.
How to Retire with Enough Money: And How to Know What Enough Is
Ever wondered how much money you need to retire or how much longer you’ll have to work to get there? In her book, How to Retire with Enough Money: And How to Know What Enough Is, retirement planning specialist Teresa Ghilarducci levels with upcoming retirees to tell them how much is enough and how to make your retirement savings grow all in a quick 144-page read.
Ghilarducci also discusses the external factors that might impact your retirement, including politics and the healthcare systems we currently have in place. If you’re looking for a way to ramp up your retirement savings, even if you’re still in college, this book is among the best financial books of all time…at least in our book.
Best financial books for millennials
If you’re a millennial in 2019, you’re likely in a more complicated financial position than people your age in past generations. Perhaps you’re a recent college grad trying to navigate the workforce on your own and you haven’t quite found a balance between entry level experience and a livable wage. Or, maybe you’ve reached the most exciting moment of your financial history thus far and you’re ready to meet another financial milestone such as buying a house or starting to invest in the stock market.
No matter where you’re at with your finances at the moment, it’s an exciting time to learn more about your money. If you’re looking for knowledge and advice specifically designed for millennials, check out these finance books.
Broke Millennial
Ever heard of #GYFLT? Author and personal finance expert Erin Lowry developed the hashtag to send millennials an important message: “get your financial life together!”. Whether you’ve started saving money or you’re living paycheck-to-paycheck , Lowry’s Broke Millennial book series acts as a guide as you prepare to tackle financial milestones such as getting married, buying a house, having kids, or trying your hand at investing.
So far, Lowry has two books in the Broke Millennial lineup: Broke Millennial: Strop Scraping By and Get Your Financial Life Together and Broke Millennial: A Beginner’s Guide to Leveling Up Your Money. Did we mention she’s also a contributor to our blog? Click here to read more from Erin Lowry.
Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence
Many of us need a step-by-step guide to help us get our habits in order—whether it’s revamping your personal finances or getting back on your fitness game. With their book Your Money or Your Life, authors Vicki Robin, Joe Dominguez, and Mr. Money Mustache team up to give readers 9 simple steps to help them shift how they deal with money to make progress toward financial independence.
If you want to learn the basics of managing money, figure out how to fund your dreams, and start taking control of your financial future, this book comes highly recommended as one of our favorite personal finance books for millennials.
Millennial Money: How Young Investors Can Build a Fortune
If you’ve been considering investing your money, congratulations! That’s a huge step to take in your financial future, and it’s an exciting time to learn about how the finance world really works, first-hand. In his guide, Millennial Money, author Patrick O’Shaughnessy discusses how young people can cash-in on the global stock market to make up for potentially limited access to pension plans and Social Security.
O’Shaughnessy recommends investing early to reap the most reward and provides a basic strategy to help you develop your stock portfolio.
Best financial books for women
From career paths and finances to family structures, women in the 21st century lead very different lifestyles now than they ever have in the past. But along with their triumphs and new opportunities, women today may find themselves facing unique challenges when it comes to managing their own money.
Whether you’re looking for help learning how to balance your family life or financial life, or you’re looking to take over the investment world, there are plenty of empowering finance books for women to boost their financial knowledge.
Here are some of the best finance books for women:
You Are a Badass® at Making Money: Master the Mindset of Wealth
You may have heard some buzz about author Jen Sincero’s premiere novel, You Are a Badass® , also informally known as the young person’s guide to self-worth and stability. Well, the first edition was so successful that Sincero has since released two other books in the series: You Are a Badass® Every Day and You Are a Badass® at Making Money.
In each of her books, Jen Sincero offers empowering advice to readers, along with real strategies to make your personal goals actually happen. In You Are a Badass® at Making Money, Sincero uses humorous personal experiences as the backbone of her monetary manifesto, while teaching readers to:
Find out what’s holding them back from making money
Generate wealth according to their own standards, rather than societal norms
Curate their own financial future instead of waiting for things to happen
If you’re in search of a modern take on money that’s relatable instead of intimidating, look no further than this one.
Smart Mom, Rich Mom
Finding a healthy financial balance can be tough when you’re raising a family…or getting ready to start one. From diapers to diplomas, having kids can end up taking a toll on your finances if you’re not armed with the right resources to keep things in check.
In her book, Smart Mom, Rich Mom, Kimberly Palmer explores different ways women can shape their financial future while raising a family. Palmer covers everything from career growth to creating budgets to help ease the stress on moms juggling household and financial responsibilities. If you’re curious about how you can prepare your budget for kids, or want to know how to repair your current financial situation, this book could be just the financial read you need.
Best financial books for budgeting
Budgeting can be one of the trickiest things to master when it comes to achieving financial wellness, but as you probably know, budgeting is an important skill to learn. Whether you’re wondering why you need a budget in the first place or where to begin, these budget-specific books are here to help.
How to Manage Your Money When You Don’t Have Any
One of the most frustrating roadblocks to saving money is feeling like you don’t even have enough money to cover your bills, let alone save. According to the U.S. Census Bureau, approximately 12.3% of Americans were living in poverty in 2017. With that statistic in mind, it’s easy to see that financial challenges are widespread across the country.
If you’ve ever been in a scenario where you’re scraping by to pay your bills but you want to save money, Erik Wecks’ How to Manage Your Money When You Don’t Have Any could give you the insight and inspiration you need to optimize your financial situation. Wecks speaks from his personal experience struggling to make ends meet in order to give context and provide readers with suggestions that might work for them, too.
The Financial Diet
Feeling lost at the thought of crunching numbers or developing a budget? Author Chelsea Fagan’s been there. In her book/life guide, The Financial Diet, Fagan gives millennials and Gen Zers the tools to take over their finances and build a better future. From budgeting to investing and slimming down spending, Fagan’s got your finance questions answered.
Best financial books for entrepreneurs
Are you planning your next business venture or world takeover as you’re reading this? You might want to take a moment to learn from the experts first. In these finance books for entrepreneurs, you can learn from their mistakes, find out how to optimize your business plan, and discover new strategies to boost your business.
You Are a Mogul
Entrepreneur Tiffany Pham has had to adapt to life fast—and she’s done more than just adapt. From attending business school at Harvard to founding her own company, Pham’s had a lot of experience building her empire from the ground up. In her book You Are a Mogul, Pham tells readers all about how she got to where she is and how they too can make their own entrepreneurial dreams come to fruition.
Whether you’re looking for guidance in identifying your passions or want to know how to “Crush it in Corporate Life,” You Are a Mogul includes the resources and real-life advice you need to jumpstart your career.
Good to Great: Why Some Companies Make the Leap and Others Don’t
Have you ever wondered what really differentiates two competing companies when it comes to success? They entered the market at the same time and both have strong branding, but why is one so much more successful than the other?
In his book Good to Great: Why Some Companies Make the Leap and Others Don’t, author Jim Collins analyzes what makes a company go from good to great, and why some companies are able to achieve success despite their mediocre reputation. Collins focuses on 4 key findings to support his theory:
Leadership structure
The Hedgehog Concept
Discipline
The Flywheel and the Doom Loop
If you’re thinking about starting your own business or what to optimize your current structure, consider using Collins’ book as your guide toward entrepreneurial success.
Best financial books for investors
Navigating the stock market as a beginner is no simple task. To help you learn the ropes, investment experts such as Warren Buffet and Burton G. Malkiel are spilling their secrets in these financial books for new and seasoned investors.
The Essays of Warren Buffet
As one of the most successful businessmen of all time, chairman and CEO of Berkshire Hathaway, Warren Buffet, is one of the most influential figures in the investment world. Lawrence A. Cunningham’s curation of Warren Buffet’s essays include topics from wealth management to investment strategy.
If you’ve considered investing in the stock market but you’re not sure where to start, The Essays of Warren Buffet could be the introductory guide you need to take the leap.
A Random Walk Down Wall Street
Jumping into the investment world can be intimidating, to say the least. But having a lay of the land, working knowledge of the terminology, and some insight on investment strategy, you could be cashing-in on Wall Street in no time.
In his investment guide, A Random Walk Down Wall Street, Burton G. Malkiel educates readers on a variety of investment topics that can easily be applied to the modern marketplace, thanks to updated editions. Malkiel covers just about everything consumers need to know about successful investing—from 401ks to digital currency trends.
More ways to learn about finance
In addition to reading some of the best financial books of all time, there are plenty of other resources out there to help you diversify and expand upon your financial knowledge. Try incorporating some of these strategies to become a self-taught financial expert:
Speak to a financial advisor
Learn more about your credit score by getting a free credit report
Listen to finance-related podcasts
Read financial news and blogs
Participate in conversations about finances with family and friends
Practice managing your personal finances by using a budgeting app
Take a class online or at a local college
Watch our #RealMoneyTalk series
Key takeaways: Best Finance Books of All Time
The financial world can often seem intimidating, but if you just take a little time to learn about it, you may find that you’ll have a better hold on your own financial standing. Use this list as a guide to help you learn more about how money works in general and as it applies to your personal finances.
Have any financial book recommendations of your own? Let us know in the comment section below!
Save more, spend smarter, and make your money go further
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