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15 Tips to Help Prepare for Retirement

Don't let retirement sneak up on you. Whether you step away from a long career with a single company, hand off the family farm to the next generation, or leave a varied employment history that spans multiple industries, you are going to need an income to live off of when you are no longer working. At BTC Bank, we want to remind you that it’s never too early to start saving for retirement. If you’re wondering how to prepare for retirement, you’re not alone. Many Americans don’t know how to save for retirement or how much money they need to save for retirement. BTC Bank cares about the future of our community and is here to help you get started planning your retirement. Here are 15 steps to retirement that you can take in Missouri and Iowa.

1.  Create Your Timeline

At what age do you plan to stop working? How old are you now? The difference between these two ages equals the number of years you have to save for retirement, and that affects how you plan your savings.

If your retirement is over 10 years away, it’s good to know that stocks historically outperform other securities in the long-term. On the flip side, stock prices are more unpredictable than other securities and are not necessarily a safe investment for someone who is only a couple years out from retirement. An investment timeline will help you plan out your investments to reflect how much risk and security you need over the upcoming years.

2.  Write Down Your Retirement Goals

What are your dreams for retirement? A quiet life at home will require less savings than an extensive travel itinerary. Your statement of goals will likely be a fluid document that changes over the years. As it changes, don't forget to account for any increased financial needs. Be specific with your goals. Some examples of specific retirement goals include:

  • Volunteer at church 4 days a week
  • Travel to Italy and China
  • Visit the grandkids four times a year
  • Start a large garden

3.  Account For Large Purchases

For some, retirement dreams are lofty and expensive. If you’ve been waiting until retirement to buy a boat and sail the world, you’re going to need more money set aside than your average retiree. Even a plan to help your children or grandchildren pay for college can add tens of thousands to your retirement planning. Be honest with yourself as you set your goals. There’s nothing wrong with dreaming big, just make sure to include these costs in your financial plan.

4.  Decide If You’ll Continue Working

For many people, retirement means slowing down, not coming to a full stop. If you plan to continue working part-time after your retirement, you can take that potential income into account. Whether you have a skill that can be transformed into a teaching or consulting gig or you’d just like a part-time job to stay busy, that extra income can help a lot in retirement. Be careful here -- if you rely on continued income during retirement you may come up short if your health or the job market prevents you from finding part-time work.

5.  Understand Your Basic Financial Needs

Daily living in retirement is not much cheaper than it is for you now. While many people assume they'll spend less money when they’re older, that’s often not the case. With more free time, you may find yourself hitting the coffee shop more often or traveling more to visit family. The last thing you want in retirement is to be forced to penny-pinch. Identify places in your budget where you might save money in retirement. For example, if your mortgage is paid off by the time you retire, you won’t have to budget for that large monthly expense.

6.  Estimate Your Retirement Withdrawals 

Take the time to create a hypothetical retirement budget for yourself. Include any expenses you will continue to have like a mortgage, utilities, food, and entertainment. How much money will you need to withdraw from your retirement account each year in order to live comfortably?

Many financial advisors recommend planning to withdraw 4% of your retirement portfolio each year after you stop working. Given this advice, a person that has saved $1 Million for retirement will have an annual spending allowance of $40,000. Understanding your financial needs will help ensure that you are saving enough for retirement.

7.  Set Your Financial Goal

Now that you know how much money you’d like to have available in retirement, you can set that amount as your financial goal. If that’s your target amount for age 65, start working backwards. How much will you need to have saved by age 55? What about age 45? Identify what savings you have now and work from there to determine how much more you need to save.

8.  Choose the Right Retirement Tools

There are many options when it comes to investing for retirement. When deciding what type of investment accounts you need and how much risk to assume, a financial planner can be a big help. BTC’s knowledgeable investment advisors will create a personalized plan to help you reach your retirement goals.

9.  Maximize Your Employment Benefits

Many employers offer matching contributions to employee retirement accounts. Take advantage of any free money your company offers. If your employer will match up to five percent of your salary contribution, then try your best to contribute five percent of your salary each paycheck. Check with your HR department if you are unsure of what retirement benefits your company offers. If you are a state employee, be sure to check out the Missouri State Employees’ Retirement System (MOSERS) website for more information.

10.  Cut Your Expenses

Even if retirement is years away, trimming back on your expenses now can mean bigger retirement accounts later. Look at your monthly budget and try to find a couple places where you can scale back your spending. Redirect that money into your retirement savings. You’ll thank yourself later when you reap the benefits of compounding interest.

11.  Ditch Your Debt

The fees and interest rates associated with debt are going to slow your march toward retirement freedom. If you can’t pay them off immediately, take action now to refinance or consolidate your debts. If you have debt when you retire, it will take away from the money you have for daily living. Prioritizing debt elimination is an important step in planning for your retirement.

12.  Create An Estate Plan

Retirement planning in Missouri isn’t just about investments. An estate plan is a comprehensive plan for your health and finances. It can include a will, health care power of attorney, financial power of attorney, and trusts. Part of estate planning is identifying your assets and making a tax-smart plan for the future. An investment advisor at BTC Bank can help you plan for your estate as part of your retirement planning.

13.  Periodically Rebalance Your Portfolio

As your retirement investments begin to grow your money, you may find that some portions of your portfolio grow faster than others. To maintain a diversified portfolio, periodically check the ratio of your investments. It’s important to monitor the proportions of your investments to ensure that they continue to meet your retirement goals. As you age, the allocation of your assets between risky investments and secure holdings should change. The closer you get to retirement, the more money you will want to move to treasury bonds and other low risk securities. Local retirement advisors can help adjust your diversification and risk tolerance to match your changing needs.

14.  Delay Your Social Security Checks

When planning your retirement income, don’t factor in social security payments until age 70. By doing so, your social security benefits will continue to increase until that year. There are many factors that affect the amount of social security you’ll receive so pay close attention to the rules of the Social Security Administration. Rather than starting payments at age 66 or 67, waiting until age 70 will maximize your payout.

15.  Maintain Your Health

One of the biggest financial surprises in old age can be health complications and medical bills. Poor health can prevent you from working or lead you to empty bank accounts paying for prescriptions and costly doctor bills. As you invest financially for retirement, consider investing in your health as well. Preventative screenings, diet changes, and overall health maintenance can make a big difference in your quality of life when you reach retirement age. Make your health a priority so you can enjoy your retirement.

Step by Step, We’ll Get You There

Planning for retirement is a series of baby steps, don’t feel overwhelmed. By following BTC’s retirement savings strategies, you’ll soon be on track to a prosperous retirement. Retirement advisors can help manage your investment savings and identify potential weak spots. Investment advisors in Missouri have a unique understanding of local needs and desires. At BTC, we’ll connect you with Missouri retirement planners who can create a custom retirement plan for your family. No matter what stage of retirement planning you are in, BTC Bank is happy to answer your questions and provide the financial solutions you need.

To learn more about planning for retirement or to schedule an appointment, contact one of our local investment advisors toll-free at 1-877-BTC-BANK. You can also visit one of our 18 locations in Bethany, Gallatin, Albany, Cameron, Pattonsburg, Chillicothe, Carrollton, Boonville, Beaman, Trenton, Gilman City, Maysville, Osborn, Jamesport, Buffalo, Oregon, and Lamoni, IA.

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