Retirement Planning in Utah

"Retirement Plan" printed on a torn strip of paper rests on top of a puzzle where each piece represents a different source of retirement income.

Whether you currently live in Utah or not, the state has become a popular place for retirees. The Milken Institute ranked Provo, Utah as the best large city for successful aging thanks to its active population, vibrant economy, safety and high levels of volunteering among older adults. There’s also plenty of healthcare facilities for easy access to care when you need it. In addition, Salt Lake City made the top five for its educated population, enthusiastic volunteer culture and access to the acclaimed Intermountain Healthcare.

To have a successful retirement in this vibrant state – or any state – however, it’s important to plan. Retirement planning is the process of defining your retirement goals and then creating a financial plan to help you achieve them. While it can be a complex and individualized process, there are certain retirement planning basics everyone should understand.

For more specific help when it comes to retirement, check out these other retirement planning guides: 

Financial Planning for Women in Utah

Financial Planning for Business Owners in Utah

Retirement Planning for High Net Worth Investors

Chapter 1

Company-Sponsored Retirement Plans

Company-sponsored retirement plans are one of the most popular vehicles for retirement savings. These plans are offered at little to no cost to employees and can provide access to lower cost investments than you would get outside of your employer’s plan. They also provide some of the highest contribution limits of any retirement plan. In 2021, employees could contribute $19,500 to their company-sponsored plan, $13,500 more than you could put into an Individual Retirement Account (IRA).

Company-sponsored plans can be defined benefit plans, also called pension plans, or defined contribution plans. With a defined benefit plan, your employer promises to pay you a specified monthly benefit in retirement. In defined contribution plans, which are more common now that pensions aren’t offered as frequently, there is no guaranteed benefit. Instead, you and/or your employer contribute to your individual account and it’s up to you to turn your savings into a retirement income stream once you retire.

A Traditional 401(k) is one of the more popular company-sponsored defined contribution plans. With a Traditional 401(k), you select a percentage of your paycheck to go into your company-sponsored plan. The money will pass straight from your employer into your retirement account without you needing to pay taxes on it first. This makes such plans easy to use because once you set your contribution amount, everything is done automatically every time you’re paid. 

The 401(k) is the most popular type of company-sponsored retirement plan, but individuals working outside of the private sector may encounter 403(b) plans for those in the nonprofit sector or 457 plans for government employees. These plans work much like 401(k)s but may have different tax treatment when you withdraw funds.

Whatever type of plan you have, it’s important to understand how it works. The financial advisors at Rock House Financial can help.

Read our recent blog posts:

What a Job Change Means to Your 401(k)

What an Early Withdrawal from Your Retirement Fund Really Means

Chapter 2

Social Security

Many people rely on Social Security for a portion of their retirement income, and for good reason: Social Security is a guaranteed source of retirement income. Once you start receiving your benefit, it won’t change (except for small cost-of-living adjustments determined by the Social Security Administration), so you can trust that you’ll get a check each month. This is particularly impactful when the bulk of a retiree’s savings are in investments that can fluctuate from month to month.

While Social Security is a great source of guaranteed income, it’s not intended to be your sole source of retirement income. Social Security is intended to replace only a portion of pre-retirement income, depending on how much you earn in your working years. To give you an idea of how much Social Security provides, the average monthly benefit paid in March 2021 was $1,427.64.

There are different strategies to maximize your Social Security benefits. For example, the benefit amount you receive will increase by 8 percent every year you delay taking your benefit after reaching your full retirement age until age 70. Talk to a financial advisor about what makes sense for you. 

Read our blog post:

3 Ways to Take Social Security: Which Is Right for You?

Chapter 3

Other Investments

Since your investments are likely to be a core source of income for you during retirement, managing your portfolio before and during retirement is crucial. Generally, you want to structure your portfolio to maximize growth during your working years and then shift to capital preservation and income during retirement, when you start to live off of your savings.

That said, balance is key in any portfolio. You don’t want to put all your money into one investment or one type of investment before or during retirement. As tempting as it is to switch to a very conservative portfolio when you retire, this can leave you at risk of running out of money. Retirement today can last 30 or more years, so you may want to maintain some growth-oriented investments to ensure your portfolio can outpace inflation. Again, talk to a financial advisor about what makes the best sense for you. 

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Chapter 4

Healthcare

Healthcare can be one of the biggest expenses a retiree faces, which makes planning for healthcare in retirement an important step. You’ll generally have a few options for how to get healthcare coverage in retirement:

  • Through your former-employer’s plan 
  • Through a spouse’s employer-sponsored plan
  • Through the open market
  • Through Medicare or Medicaid

Medicare is often the cheapest option outside of a spouse’s employer-sponsored plan, but you can’t start receiving Medicare coverage until you turn 65. If you retire within 18 months of becoming eligible for Medicare, there are plans that can help you stay insured, but often times, these plans come at a much higher cost. You may need to pay the entire premium for your coverage up to 102 percent of the plan’s cost. A spouse’s employer-sponsored plan is likely more cost-effective, if it’s an option.

Alternatively, all states have an open marketplace where you can buy healthcare insurance directly from private insurers. A financial advisor can help you weigh your options. Because the financial advisors at Rock House Financial are not affiliated with any specific insurance firm, there is no conflict of interest. Discussing your needs with a trusted individual who understands your overall financial picture can help ensure you get the coverage you really need. 

Read our blog post:

Rock House Resources: Preparing for Healthcare Costs in Retirement

Chapter 5

Plans for the Day-to-Day

One of the most important components of retirement planning is determining what you’ll do when you retire. In fact, everything hinges on these plans. What you do and where you live will dictate how much you spend in retirement, which, in turn, determines how much you need to save. Take time to really envision what your life will look like after you stop working, then consider the financial implications of this vision.

Important questions to ask include:

  • Where will you live? If you want to stay in your current residence, will your mortgage be paid off before retirement? If you want to move, where will you go? What is the cost of living in this new location? If you sell your current home, how will the proceeds from your home sale impact your income in retirement?
  • Will you stop working entirely or do you want to keep some hours even in retirement? Many retirees are finding enjoyment in second-act careers or part-time work in retirement. Having even a per diem job can help generate additional income in retirement or even provide health insurance coverage.
  • How will you spend your time? Beyond work, do you want to travel more or would you rather stay close to home? Are there any hobbies you want to pursue? How much will your travel and activities cost?

Continue asking yourself questions about how you want to retire until you have a clear vision of what it will cost to make your dream retirement a reality. Simply staying home and “relaxing” can get old fast, and boredom can quickly lead to loneliness and depression.

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Chapter 6

Keeping Your Information Safe

The financial services industry is a prime target for hackers and scammers, making it important to take steps toward keeping your information safe. At Rock House Financial, we have several safeguards in place to keep your information safe, but you can and should still take steps to protect your information. 

For example, don’t share your passwords with everyone. If you want to give someone access to your financial accounts, you can typically set them up as an “authorized user,” with their own log-in and password. This also allows you to control how much access the person has. 

Your own password should of course be strong and unique. Don’t let your browser save financial passwords for you, and make sure to close your browser after you log out of any account. Many companies offer two-factor authentication for extra security. This would require you to enter a second code that’s sent to another device before logging in.

Lastly, be sure to monitor your account activity regularly. Review your statements and any notices you receive from your financial institution. If offered, sign up for security alerts so you’ll be notified any time a transaction occurs or someone logs into your account.

Read our blog post:

10 Things You Should Be Doing to Protect Yourself from Identity Theft