4 Financial Planning Tips for Firefighters

Only about 25% of Americans aged 60 and over have access to a defined-benefit plan, also known as a pension.1 Firefighters are in the small group of Americans who have the option of an employer-sponsored pension plan, but this may not be enough for a confident retirement. So what else can you do now to improve your financial standing in the future? Here are four financial planning tips that may help firefighters.

Look Outside the Pension

Even if your pension plan is healthily-funded now, there are no guarantees. Pension benefits may go down, vesting requirements may be lengthened and the minimum age to draw pension benefits might increase. By saving for retirement outside your pension, you may have more flexibility when considering retirement or a career change.

Calculate How Much You May Need in Retirement

If you are already vested in your pension and are able to calculate the approximate amount you may receive at retirement, you use this figure to help create your retirement budget. Consider at what age you might like to retire and calculate your expenses at that point. Is your home going to be paid off? Do you have children in college or about to attend college? Do you plan to downsize your home to manage expenses?

By creating an estimated figure of what you may spend in retirement, as well as how much monthly or annual income your pension may provide, you might be able to calculate how much you may need. Then, set aside that amount each year from now to your projected retirement date.

Start Today

As the saying goes, the appropriate time to invest in your future was 10 years ago; the alternative time is today. By getting started with non-pension savings early, the funds you set aside have more time to grow. And as you grow older, you may be less able to respond to unforeseen challenges or financial hurdles quickly. The more money you set aside when you get to that point, the more flexibility you may have in the future. Even if you only set aside a small amount now, making an effort to save might create healthy financial habits that may serve you well.

Avoid Costly Investment Mistakes

Making wise investment decisions is important. Equally important is avoiding expensive investment mistakes. If you put all your investment eggs into one stock and the company declares bankruptcy or the stock plummets in value, you may find yourself facing staggering losses. In some cases, investing in a basic index or mutual fund might have been a better choice.

Even savvy investors may be frightened by a market downturn, and withdrawing funds at the bottom could cause a loss that makes it difficult to recover. Working with a financial professional to develop an investment plan may help guide you to make confident decisions by avoiding an overreaction that may cost you money.

Sources

1 https://www.cnbc.com/2020/01/17/heres-where-most-americans-are-really-getting-their-retirement-income.html

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

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