Financial security in retirement takes planning and commitment and yes, money.
1. Start saving and keep saving
It’s never too early or too late to start saving for retirement. If you are already saving, keep going! If you aren’t, it’s time to start. Start small if you have to, increasing the amount you save each month. Allow your money more time to grow by starting early.
2. Understand your retirement needs
Retirement is not cheap. Experts estimate that in order to maintain your standard of living when you retire, you will need at least 70 to 85 percent of your preretirement income.1 For a secure retirement, it is necessary to plan ahead. Utilize the retirement calculators on the Fidelity (www.fidelity.com) and TIAA (www.tiaa.org) websites.
3. Learn about GW’s 403(b) and 401(a) retirement plans
You may begin making contributions to GW’s 403(b) Retirement Plan upon employment with the university. GW offers traditional (pre-tax) and Roth (post-tax) options. After completing two years of service* at GW, you will automatically be enrolled in our 401(a) Retirement Plan, to which GW will make a base contribution of 4 percent of your eligible salary. Here’s where it gets really good: If you participate in the 403(b) Retirement Plan, GW will also match 150 percent of the first 4 percent of your contributions, up to a maximum match contribution of 6 percent!
*The two-year service requirement may be satisfied in whole or in part by service at another college or university. Visit www.benefits.gwu.edu/401a-retirement-plan to learn more.
4. Consider basic investment principles
Inflation and the types of investments you make have a major effect on how much you will have saved at retirement. Learn about your plan’s investment options and ask questions along the way. Diversify your portfolio by putting your savings in different types of investments; by doing so, you are more likely to reduce risk and improve return. Over time, your investment mix may evolve depending on various factors such as age, goals and financial circumstances.
5. Contribute pre-tax or post-tax Roth to GW’s 403(b) retirement plan
Currently, you may contribute up to $18,000, per year, to the University 403(b) plan; those who are over 50 years of age may contribute an additional $6,000 for a total of $24,000. The IRS has also announced dollar limitations for retirement plans for the 2018 calendar year; the elective deferral limitations for the 403(b) plan will increase by $500 to $8,500, while the catch-up contribution limits for individuals aged 50 and older for the 403(b) plan will remain the same at $6,000.
6. Try not to touch your retirement savings
If you withdraw from your retirement savings prematurely, you will not only lose principal and interest, but you may also lose tax benefits or face withdrawal penalties. When changing jobs, leave your savings invested in your current retirement plan or roll them over to either an IRA or your new employer’s plan.
7. Learn about your Social Security benefits
On average, Social Security retirement benefits will replace only about 40 percent of what you earned before retirement.2 Estimate your benefit by using the retirement estimator on the Social Security Administration’s website: www.socialsecurity.gov.
8. Ask questions
The tips in this article only brush the surface of what you need to know about saving for retirement. Find more information by visiting www.benefits.gwu.edu/retirement-counseling.
1. Scholz, John Karl, and Ananth Seshadri. 2009. “What Replacement Rates Should Households Use?” MRRCResearch Paper No.2009-214. Ann Arbor, MI: University of Michigan Retirement Research Center.
2. “Prepare For Your Financial Needs.” Retirement Planner: Learn About Social Security Programs, www.ssa.gov/planners/retire/r&m6.html.
