Commentary · Commentary
It's Never Too Early - or Too Late - to Think About Retirement
Written by the William Allan team · Published
For educational purposes only. This article is intended to provide general information about retirement planning concepts and does not constitute personalized investment, tax, or legal advice. Please consult with a qualified financial advisor, tax professional, or attorney regarding your specific situation. Investing involves risk, including the possible loss of principal.
Retirement planning can feel overwhelming. Between fluctuating markets, changing tax laws, and the sheer number of account types available, it's easy to postpone getting started. But for many people, beginning to think about retirement - at any stage of life - is one of the most important financial steps they can take.
This article introduces some of the core concepts that often come up in retirement planning discussions, and is meant to help you ask better questions when working with a financial professional.
Start with a picture of what you want
Before you can plan, it helps to have a general sense of your goals. Questions worth exploring include: at what age would you ideally like to retire? What lifestyle do you hope to maintain? Do you anticipate significant healthcare costs or other major expenses? These questions may feel abstract, but they can form the foundation of a personalized retirement strategy.
A commonly cited benchmark is that retirees may need approximately 70–80% of their pre-retirement income to maintain a similar lifestyle. However, individual circumstances vary significantly, and this general guideline may not apply to everyone.
The classic 4% rule starts with a first-year withdrawal of about 4% of the portfolio’s initial value, then adjusts that dollar amount for inflation in later years. It is a historical planning guideline commonly discussed for a 30-year retirement, not a guarantee. Fees, taxes, portfolio choices, market returns, and retirement length can change the result. William Bengen’s original withdrawal research.
The role of time and compounding
One concept that comes up frequently in retirement planning is compounding - the process by which investment returns generate their own returns over time. Starting to save earlier generally allows more time for compounding to work, though it is never too late to begin building toward retirement.
"The earlier you begin saving, the more time your money has to potentially grow - but meaningful progress is possible at any stage."
For those earlier in their careers, consistent contributions over time can be powerful. For those closer to retirement, strategies like catch-up contributions (available in many retirement accounts for those 50 and older) and working with an advisor on asset allocation may help accelerate progress.
Understanding common retirement account types
Several tax-advantaged account types are commonly used for retirement savings in the United States. Each has distinct rules around contributions, tax treatment, and withdrawals. A qualified advisor can help determine which combination may be appropriate for your situation.
401(k)
Employer-sponsored plan
Pre-tax contributions reduce taxable income today. Many employers offer matching contributions - check your plan documents for details.
Roth IRA
After-tax contributions
Contributions are made with after-tax dollars; qualified withdrawals in retirement are generally tax-free. Income and contribution limits apply.
Traditional IRA
Tax-deferred growth
Contributions may be tax-deductible depending on income and other factors. Taxes are generally paid upon withdrawal in retirement.
HSA
Health savings account
Available to those with qualifying high-deductible health plans. Offers potential tax advantages for healthcare costs, including in retirement. Eligibility rules apply.
Tax considerations in retirement
The tax picture in retirement can be more complex than many people expect. Required minimum distributions (RMDs), Social Security income, and capital gains can all have tax implications. Strategies such as Roth conversions, tax-loss harvesting, and careful withdrawal sequencing are sometimes used to help manage tax exposure - but the appropriateness of any strategy depends heavily on individual circumstances. Consult a tax professional for guidance specific to your situation.
Social Security: understanding your options
Social Security retirement benefits can generally start as early as 62. Claiming before full retirement age can reduce the monthly benefit. Waiting beyond full retirement age earns delayed credits until 70; filing after 70 is possible but earns no additional delayed credits. Survivor and disability benefits follow different rules.
The right time to claim depends on health, other income, marital status, and personal goals. There are limited options to withdraw an application or suspend benefits, with specific conditions. Use your own benefit estimates and check the rules with Social Security. SSA delayed retirement credits, SSA benefit suspension.
Have questions about your retirement strategy?
Schedule a first call. The first conversation is an intake call with Ian, who gathers your situation and helps connect you with the appropriate advisor. It is not an advisory meeting.
This commentary is for informational purposes only and is not investment, tax, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.