It's No Secret. You Need to Save Now if You Want a Secure Retirement.
You probably aren’t planning to run out of money in retirement. But if you’re not saving now, you might be setting yourself up for that. KPERS and Social Security are just two parts of your retirement income. To have a secure retirement, you need to save on your own, too. Here are some tips to help you jump-start your personal savings.
Pick a Place to Save
One of the easiest ways to save is through a plan at work. Many employers offer tax-sheltered 457(b) or 403(b) retirement plans.
Some employers, including the State of Kansas, offer KPERS 457, a 457(b) deferred compensation plan. You choose how much to save and contributions are automatically deducted from your pay. You can get started with as little as $12 a pay period. If you’re a teacher or work for the Kansas Board of Regents, your employer may offer a 403(b) plan, also known as a tax-sheltered annuity. Be sure to check with your employer to see which plans they offer.
If your employer doesn’t offer a retirement plan, you may want to consider an individual retirement account (IRA). Starting January 1, 2019, you can save up to $6,000 per year in either a Traditional or Roth IRA. That bumps up to $7,000 if you’re over age 50.
Set a Savings Goal
Once you pick a method, decide how much you will contribute. Experts recommend saving 10-15% of your pay for retirement. Remember, you’re already contributing 6% to KPERS. Try to carve out an extra 4-9% in your budget for savings. If you need to, get started with a small amount, such as $25 a month or 1% of your pay. You can increase it every year until you reach your goal.
Start Saving Today
Don’t let the options overwhelm you into not saving at all. Ask your employer about options where you work, or contact a financial institution to learn about IRAs. Figure out where you want to save and open a retirement account today.
No matter where you plan to save, the important thing is to start. Even saving a small amount now could pay off big in retirement. Your future self will thank you.
Just Starting Out (Under 35)
You Can't Afford to Wait
Raise your hand if retirement is a lifetime away. Yep, you have 30-40 years before you can clock out for the last time. You might be tempted to put off saving until you pay off your student loans or get a raise. But if you wait until you’re 35 to start saving, you'll contribute $18,000 less than someone who starts saving in his or her mid-twenties, and have about half the savings at retirement.
You really can’t afford to wait. If you do, you're basically losing out on free money thanks to compound interest.
The numbers in the above image were calculated using https://www.daveramsey.com/smartvestor/investment-calculator. Assumes 6% rate of return.
Somewhere in the Middle (Over 35)
You Can Still Catch Up
The closer you get to retirement, the more important it is to keep pace with your retirement savings. If you put off saving for a few years or feel uneasy about retirement, there’s still time to catch up. Check out these three tips to help you boost your savings.
- Increase Your Contributions. Look at your budget for things to cut that might help you increase your savings rate. Or, if you get a raise or a bonus, consider adding it to your retirement savings. Use an investment calculator to see what an extra 1-2% or $50 a month can mean for your retirement balance.
- Hold Off Saving for College. Your kids can apply for grants and loans to help pay for college. But there isn’t a financial aid application for your retirement. You may want to consider decreasing the amount you’re saving for college and boosting your retirement fund until you’re caught up.
- Knock Out Debt. Make a plan to pay off your outstanding debts. Then you’ll be able to funnel that money into savings.
Over Age 50? Make a Catch-Up ContributionIf you’re over 50, you can save an extra $6,000 (possibly more if you’re within three years of retirement) in a 403(b) or your KPERS 457 account, or an extra $1,000 in your IRA.
KPERS Benefit Brief
How Are KPERS Benefits Funded?
Curious about how your benefits are funded? Here is a quick look.
- Throughout your career, you contribute part of your pay to KPERS.
- Your employer also contributes to help fund the System.
- The rest comes from investment income.
KPERS invests the money and when you retire, pays you a monthly benefit for the rest of your life. On average, investment income accounts for more than 50% of annual income to the Trust Fund.
To learn more, choose your group from the Active Member page and select “Contributions & Funding.”
Retirement System Funding Sources
KPERS Investment Snapshot
Our actuarial projections assume an average, long-term investment return of 7.75%. In some years, returns will be below that rate, and in others, returns will exceed it. While investment returns each year are important, healthy returns over time are essential for proper funding.