How to Choose the Best Retirement Plan for Your Goals

| August 21, 2023 | By

Choosing the right retirement plan isn't simply a matter of numbers and percentages. Retirement planning is all about ensuring a comfortable, secure future for yourself and your loved ones.

That doesn’t mean the retirement planning decisions you have to make are easy. 

Fortunately, taking action now can really protect your future. Whether you have two years, twenty years, or more before retirement, read this simple guide to choosing the right retirement plan to ensure you get started with the best possible strategy.

Your Step-By-Step Guide to Choosing the Best Retirement Plan

Very likely, you have (many) questions. How do I choose a retirement plan? How do I determine my retirement goals? And, of course, what is the ideal retirement scenario, anyway? 

We’ll break the retirement planning process down for you so it’s as accessible as possible. 

1. Identify your retirement goals.

Your retirement goals are your hopes, dreams, and bucket-list plans that you want to tackle in retirement. It’s the once-in-a-lifetime European cruise or the family ranch you hope to own. 

Determining these goals isn’t just a fun exercise. Identifying what you want is crucial because it will help you tailor your unique retirement plan to help you achieve your dream retirement. 

Talk to your loved ones, do some research, and really think about it: What do you want to be doing in your golden years? 

2. Understand your time horizon.

Your time horizon is the number of years you have before planned retirement. The longer your time horizon, the longer the money you invest for retirement has to grow. 

Your time horizon can also influence the strategies you choose when investing your retirement funds. Typically, if you have more time, you may be able to take more risks with your investments to aim for higher returns. If you’re nearing retirement, it may be better to play it safe and protect your investments.

3. Set a budget for saving.

You may have some idea that saving as much as possible for retirement would be helpful. In some sense, that’s true—now more than ever. Today, life expectancies are longer than they’ve been in the past. Investors have to plan for more years in retirement. 

However, putting some numbers to your retirement goal can help you manage your wealth strategically, determine your ideal monthly contributions, and help you make sure you have the funds to accomplish your goals within retirement. 

A good rule of thumb is to try and set aside 10-15 percent of your pretax income for retirement. If you can’t quite do that yet, no problem; every dollar saved makes a difference, and you can always increase your contributions over time. 

4. Consider these retirement plan factors.

Figuring out what’s important about specific retirement plan offerings can require wading through a lot of confusing jargon. Here’s a straightforward guide to some of the essential terms to know: 

  • A plan’s contribution limits detail the maximum amount you can contribute under that plan annually. 

  • Different retirement plans offer different tax advantages. Some offer tax breaks now; others provide similar tax breaks later. 

  • Your retirement plan will allow you to set aside money to put into different types of investments, for example, stocks versus bonds.

  • If your retirement plan is through your employer, you might have an employer match (i.e., your employer contributes a dollar toward your retirement fund for every dollar you contribute, up to a certain limit).

Your retirement plan may also have withdrawal penalties to discourage taking money from your retirement account early. Knowing these factors about the retirement plans you’re looking at can help you align your plan with your goals. 

5. Know your retirement plan options.

Depending on your circumstances, there may be several specific planning options to choose from. Here are three common examples: 

  • A 401(k) is a very popular employer-sponsored retirement plan. Through your 401(k), if you’re an employee, you can contribute a portion of your paycheck to your fund. Your employer may offer a contribution match.  

  • A SIMPLE IRA is a plan ideal for small businesses with fewer than 100 employees. They have lower administrative costs but stricter rules to follow than 401(k)s.

  • A Roth IRA is an individual retirement account that isn’t tied to your job. You can open an account through your bank and contribute post-tax money. You can then withdraw the money in retirement tax-free. 

Wondering How to Build Your Best Retirement Plan? We’re Here to Help

Selecting the right retirement plan for your goals is crucial. Staying consistent with your contributions, perhaps by setting up automated transfers to your retirement fund, is helpful to ensure you’re in a good place to meet your financial goals. We’d also recommend setting up a regular review of your retirement plans to ensure you’re making the best choices for your future. 

The team at BNC National Bank is here for you! If you’d like to discuss retirement planning strategies, reach out to our friendly team. In the meantime, check out this free resource to get started: The Guide to Retiring.

Retiring Welll Starts Today