The best place to retire in the entire world is Switzerland. That’s according to research fielded by Nataxis Global Management. The ranking is based on 20 key trends broken out from four broad categories: Health and health care quality, personal income and finances, quality of life and socio-economic factors. The United States barely made it into the top twenty, ranking number 19.
While the Swiss Alps are astounding, we enjoy our (usually) mild Southern winters too much to make that move.
But the research underscores the reality that, as Americans, we have to work harder than ever to gain financial security in retirement. Consider the path to life after work in every stage of life:
No doubt, this will be one of two debt-reduction stages in your life. It is quite likely you have amassed quite a bit of credit card debt through your college years and transition to full-time employment. We won’t even mention the student loans.
Now that you have that first (or second) full-time building-a-career-job, you will have two priorities: reducing debt and taking the entrance ramp on to the road to retirement.
There are plenty of blogs to inspire your credit card payoff plan; it’s just a matter of getting serious about it. And the retirement highway is marked with a sign reading “401(k).” If your employer offers one, sign up if you haven’t already, and defer at least as much salary as it takes to gain every dollar of any employer match. If the company you work for doesn’t offer a match, contribute as much as you can without breaking a no-doubt bare-bones budget.
That will probably be as much as you can handle in this first stage of life before true love.
Married with children
And then there are two. You and your significant other; and than a dog. Followed by a family. Things are getting pretty serious about now. If you haven’t already, it’s time to feed just one more family member: an IRA. You can choose a Roth or traditional IRA; your tax advisor can guide that decision. You’ll also want to max-out that 401(k) now, beyond the level of just the employer match. During these, your prime earning years, you want to make every retirement savings dollar count – before you start spending on all of life’s tempting non-essentials.
And that’s tough, because with children and all of your family-driven financial responsibilities, it’s easy to neglect your retirement savings. That why we’re making it automatic with maximized pre-tax and straight-from-the-paycheck 401(k) contributions. Your priorities should be: 1) Retirement savings, 2) children’s’ college funds and 3) everything else.
This is likely another period of your life where you are rapidly piling on a heap of debt: house, cars, credit cards (again). If you prioritize retirement savings by making tax-advantaged deposits to your 401(k) and IRAs first – and to the legal limit – it will help you minimize the debt damage.
Now the kids are in college, or a commune – sometimes things just don’t work out the way you think they will, right? – and you and the significant other are enjoying the scenery on the road to retirement. Plus, you’re facing your second debt-reduction plan: paying off the house, the cars and the credit cards.
By now, you should have a big, juicy balance in your 401(k) and the IRAs are looking pretty good, too. “Catch-up” contributions available to those 50 and over can help beef-up those balances even more.
Life after work
Taking the exit ramp on the road to retirement means pulling out a map and navigating Social Security, Medicare and your retirement benefits. You may decide to work part-time, or even full-time, at something you love. If so, you can adjust the withdrawal rate from your retirement assets to make them last even longer.
America may trail Switzerland in retirement rankings, but most of us aren’t too fond of snow shovels anyway.
Guest Post by:
Hal Bundrick, NerdWallet