Retirement Planning for Nurses: The Beginner’s Guide

two nurses talking to financial advisor

Nursing is one of the most stable and sought after careers in the United States.

Nursing can be financially fruitful, which gives you ample resources for future finances.

Whether you have worked as a nurse for 10 years or 10 days, you need to think about your retirement plans.

*Disclosure: This article on retirement planning for nurses may contain affiliate links. If you click and make a purchase, I may receive a commission. For more info, please see my disclaimer.

The Truth About Retirement Planning

Retirement is about much more than vacations, gardening, or spending time with your grandchildren.

Though these things are great, having a retirement plan means you have a solid backup if you can no longer work due to injury or illness.

Being a nurse means using some of your income to be prepared for an uncertain future.

Find a Finacial Planner!

Retirement planning can be very difficult, not to mention complicated. If you don’t want to deal with it, you need to hire a financial advisor you can trust to help guide you on the journey.

What is Retirement Planning

The short answer is that retirement planning is the act of putting money away for the future. The long answer is much more complicated.

You can technically retire at any age you desire. However, according to the United States government, you cannot retire and receive full social security benefits until you’re 70 years old.

Likewise, you cannot begin withdrawing money from an IRA or a retirement plan until you reach age 72.

Therefore, for most people, a retirement plan covers the cost of living expenses from the age of 72 through the end of their lives.

Conversely, you can begin withdrawing money from a 401k as early as age 59. You can even withdraw without a penalty at age 55 if early retirement is necessary.

However, you also need to remember that early retirement means you need to have even more in savings than if you retire “on time.”

You will also need to find a health insurance plan that you can afford until you are eligible for Medicare.

The act of planning for retirement can be simplified into a system that allows you to invest money on a regular basis into a fund that can then be used once you reach retirement age.

Why Should You Plan For Retirement?

The average life span in the United States is about 78 years old. You may not be able to reasonably assume that you will be able to work through the end of your life.

Therefore, you need to have some money to pay for living expenses from age 72 through the remainder of your days.

Of course, you can’t assume that you will only live for six years after retiring. Some experts state that the maximum age for humans is 122.

This video discusses the maximum age a person could live to.

Naturally, most of us can’t expect to live that long either. However, you can use an assessment to guess how long your life will be.

Look at the lifespan of your ancestors, any family history of disease, what type of lifestyle you lead, and even a blood test to get a rough idea of what you might expect.

Many people will find that they could reasonably live another 20 years or longer after retiring. You must have funds that cover the cost of living during that time.

Considering regular bills is not enough. As you age, you will spend significantly more on healthcare.

As a medical professional, it should be no surprise that the largest expenses in your senior years will be medical treatments.

You will need to have enough money in your retirement to cover those costs and anything else that may occur.

Retirement can also be about living well in your golden years. You might have a dream to take a world cruise or another special vacation you didn’t have time for while working.

You might want to buy a timeshare or summer home. Many retirees enjoy helping their children and grandchildren with financial expenses.

Consider all of your wants and your needs as part of your retirement plan.

When Should You Start Saving For Retirement?

retirement savings chart

Yesterday was a great day to start saving for retirement. If not yesterday then today is when you should start saving for retirement.

No matter what your age is, saving some of your money and investing it for retirement should be on your mind.

It’s possible you don’t have money to spare for a retirement fund. This certainly makes retirement savings tricky.

The best way to manage this is to make a thorough list of your monthly expenditures.

Don’t forget items like emergency funds and a breakdown of those bills that are not paid monthly, like some types of insurance and property taxes.

Include all debt repayments as well. You will then have a good picture of exactly how much money you have left to put into retirement.

Yesterday was a great day to start saving for retirement. No matter what your age is, retirement savings should be on your mind.

Thomas Uzuegbunem, BSN, RN (NurseMoneyTalk.com)

One question many people have is whether or not to pay off debts before investing in retirement plans.

Some experts agree investing in your future while paying off your debt is the wisest route.

At the same time, other financial experts, such as Dave Ramsey, recommend paying off all debt before investing for your retirement.

Another way to consider when you should start investing in retirement is your current age. If you’re fairly young, you have a long time to save for retirement.

Your investment in your future should start now, but you won’t have to put in as much to have enough to last.

If you are 50 or older, you don’t have nearly as much time. You’ll need to start investing large dollar amounts quickly to ensure a comfortable future.

Find a Finacial Planner!

Retirement planning can be very difficult, not to mention complicated. If you don’t want to deal with it, you need to hire a financial advisor you can trust to help guide you on the journey.

How Much Should You Save For Retirement?

It is impossible to know exactly how much money you will need when you retire. The rate of inflation is not static.

You also have no way of knowing what kind of health issues you may face. The general rule is to save 10 to 15 percent of your wages each year.

The average salary for a registered nurse is about $72,000 per year. Therefore, the average RN should be setting aside a minimum of $7,200 every year that they are working.

You can also base your retirement goals on your current expenditures. Your monthly bills probably include rent or mortgage, utilities, cell phone, food, insurance, automobile upkeep and fuel, entertainment, and taxes.

You can assume you will continue to have these bills as you get older.

For instance, if you currently spend between $2,000 to $3,000 per month, you will need around $36,000 for every year you expect to be alive after you retire.

Don’t worry:
That doesn’t mean you have to save the exact amount you spend every month.

A retirement plan grows over time, thanks to interest. The $100 you put in today could easily be $1,000 in a couple of years.

As interest compounds, your retirement investment will grow while you continue to work and contribute.

Something very important to keep in mind is the benefit of employee contributions.

Your employer may offer to match your contributions to a retirement plan or IRA.

Make sure you take advantage of this as much as you can.

Related: When is the Ideal Nurse Retirement Age?

Where Do You Invest For Retirement?

Now we’re getting into questions that focus on learning how to actually invest your money for retirement.

There are three main ways you can handle this.

The first option is to invest and manage the funds yourself through an online brokerage. Here are some options of online brokerages you could use.

  • Betterment – Betterment is an easy way to start investing today with as little money as you want.
  • Ally Invest – Ally Invest is a full-service brokerage with a minimum starting amount needed to make your first investment.
  • Vanguard – Vanguard is a low-cost full-service brokerage.

Using Online Brokerages is Not For Everyone
Online investments can be a quick and easy way to get your feet wet when it comes time for you to start saving for retirement.

By using online platforms, investors have access to professional fund selections as well as resources that pertain directly related to managing their portfolio.

The second option and probably the one I would suggest for most people is to get in contact with a personal finance advisor to walk you through your investing options.

I walk you through a lot of your options below but you can go here to start searching for a personal finance advisor.

The third option is to use an employer-sponsored retirement account. More on that below.

What Are the Differences Between Retirement Accounts?

ira roth 401k
IRA vs 401K vs Roth vs TSP

The variety of retirement accounts available can be confusing at first glance.

It’s actually very simple to start understanding retirement savings plans with just a few minutes of reading.

401k Retirement Plan

piggybank next to 401k

The basic retirement plan is the 401k.

This is standard across most industries though you may see a different set of numbers in certain places.

For example, educational institutions usually use a 403b rather than a 401k, but its function is basically the same.

A 401k is a retirement plan that your employer sets up. You can contribute directly to the program from your salary using pre-tax income. This allows you to lower your overall salary while also investing in your future.

That means you will pay lower taxes on earned income, but you still get to reap the rewards from the money you’re not using.

A 401k grows tax-free (technically tax-deferred) as well.

Pros:

  • Pre-tax contributions
  • Set up and managed by your employer
  • Tax-free growth

Cons:

  • Little to no investment choices
  • Withdrawals are taxed upon retirement
  • A limited amount can be invested (though the limit is quite high)

Roth 401k

Like a standard 401k, a Roth 401k is an employer-sponsored retirement plan.

Unlike a standard 401k, a Roth 401k is paid using post-tax income (money that has already been taxed).

This means you do not get the tax break now, but it also means you don’t have to pay taxes on future withdrawals.

Pros:

  • Withdrawals are not taxed
  • Contribution limits increase along with inflation
  • Funds can be withdrawn early with no penalty in case of disability

Cons:

  • Few investment choices
  • Withdrawals are required beginning at age 72
  • There are no immediate tax benefits

Traditional IRA

jar full of money with ira written

An IRA is an Individual Retirement Arrangement. Unlike a 401k, an IRA is not managed by your employer.

You can set up an IRA with any financial provider you choose. You manage the IRA yourself and can even alter the investment as you see fit.

This is a great option for someone who does not have an employer-based retirement program. It’s also often used in addition to a standard retirement fund.

The money you invest in a traditional IRA grows tax-free. However, you do have to pay taxes on that money once it is withdrawn.

The contribution limit is also very low and doesn’t always increase with inflation as 401k plans can.

Pros:

  • Not tied to an employer, therefore anyone can take out an IRA
  • Wide variety of investment options
  • Contributions grow tax-free

Cons:

  • The contribution limit is very low
  • Fees are often associated with an IRA
  • You will pay taxes on withdrawals
  • You are required to withdraw funds beginning at age 72

Roth IRA

A Roth IRA is different from a traditional IRA. Both are managed by you and not your employer.

Both a Roth and a traditional IRA can be taken out through numerous financial firms.

A traditional IRA is taxed once you begin withdrawing because the contribution may be deducted from your income taxes.

Conversely, a Roth IRA contribution cannot be deducted. You will pay full taxes on the money that is invested, but you do not have to pay taxes on the withdrawals.

This is extremely beneficial for retirees who need every penny they can get from their retirement investments.

Another difference between a Roth IRA and a traditional IRA is that you do not have to take withdrawals beginning at age 72 if you don’t wish.

A big difference between the two is that anyone can take out a traditional IRA whereas there are income limits for investing in a Roth IRA.

This limit changes often so it is necessary to check every year to ensure you won’t be fined for taking out an IRA that you can no longer legally hold.

Pros:

  • Withdrawals are not taxed
  • Wide variety of investment options
  • Withdrawals are not required

Cons:

  • There are no tax incentives to contribute to a Roth IRA
  • Those who earn above a certain income threshold may not contribute
  • Low contribution limits overall

Thrift Savings Plan

piggybank with tsp written on it

A Thrift Savings Plan, or TSP, is similar to a 401k. However, a TSP is only open to federal employees.

Nursing jobs within the federal government are highly sought-after positions that often pay well and have excellent benefits. One of these benefits is the TSP.

Like a 401k, a TSP offers payroll deductions for contributions and a limited number of options for investment.

Pros:

  • Both traditional and Roth TSPs are available, which let you decide when you want taxes taken out of contributions
  • You may rollover private sector funds into your TSP and vice versa
  • The federal government will match up to 5 percent of your salary.

Cons:

  • The contribution limit is about the same as a 401k
  • Few investment options
  • Only available to federal employees

Find a Finacial Planner!

Retirement planning can be very difficult, not to mention complicated. If you don’t want to deal with it, you need to hire a financial advisor you can trust to help guide you on the journey.

7 Must-Know Tips For Saving For Retirement

1. Know Your Retirement Goals

Your retirement goals are determined by the date you wish to retire and the amount of money you think you will need to live out the rest of your days.

Start with a solid dollar figure in mind. It’s okay to over-estimate the amount you will need.

2. Don’t Assume You’ll Be Working After Retirement

Think of your retirement plan as your full source of income. Do not assume that you will work part-time after you retire.

Your health may deteriorate as you age, which could make a difficult and stressful job like nursing impossible.

3. Start Saving as Soon as Possible

Start saving as soon as you can, even if you can only put in a few hundred dollars per year. At the end of the day, that’s money that will grow significantly over time.

4. Research as Much as Possible

Do as much research as possible before and while you’re investing. If you find it too difficult to understand, hire a financial advisor.

5. Avoid Prematurely Withdrawing Retirement Funds

Do not look at retirement as a backup plan for everyday expenses. Removing money from your retirement fund prematurely comes at a high price.

You will pay a fine and taxes for early withdrawals. You will also deplete your future. Consider any retirement contributions as untouchable.

6. Take Full Advantage of Any Employer Matches

If your employer offers 401k matching, take full advantage of it. Some employers will match up to a specific threshold, but only if you contribute as well.

7. Seek Out Help When Needed

Talk with your human resources department about any questions regarding employer-sponsored plans. Their job is to guide you through these plans. Therefore, no question is too small.

Lastly, consult with a financial advisor for a more detailed analysis of your financial picture. Go here to find a financial advisor.

Should You Hire a Financial Advisor?

Hiring a financial advisor is a personal matter.

If you’re comfortable or even enjoy managing your investments, a financial advisor might not be necessary.

If you’re fearful about making choices with your money due to lack of knowledge or simple disinterest, a financial advisor could be the best thing for you.

Find a Finacial Planner!

Retirement planning can be very difficult, not to mention complicated. If you don’t want to deal with it, you need to hire a financial advisor you can trust to help guide you on the journey.

Examples of When to Hire a Financial Advisor

Below are some examples to help you figure out when to consider hiring a financial advisor.

Do You Need a Financial Advisor? Example 1

Neither my husband nor I are financial experts. However, we are very interested in finances, and we’re both good with numbers.

Still, we thought a meeting with a financial advisor would give us the right direction.

The advisor went over our data, asked all of the most important questions, and then told us she would do what we were already doing for us.

Basically, we would be paying her to continue on the path we had started.

We said our goodbyes and have continued to manage our financial planning on our own.

Do You Need a Financial Advisor? Example 2

My dear friend Kay and her husband Nick both work in the medical industry.

They have two beautiful daughters, a very high six-figure income, and crushing student loan debt. Neither of them has the interest or the time to manage all of their finances.

They went to a financial advisor who took their jumbled mess of data and turned it into a great, reasonable, and reachable plan.

Kay says she would not be able to manage what her financial advisor does because she simply doesn’t have the energy for it.

Do You Need a Financial Advisor? Example 3

Madeline is a close friend who has worked in the nursing field for nearly three decades. She chose to manage her finances on her own until she had children later in life.

Now in her mid-50s, she has two young children and has found herself needing a financial advisor to ensure she will have enough retirement savings to support her.

On top of that, she also wants to be able to provide for her children as they enter college and early adulthood.

Madeline’s financial advisor has helped her with a retirement plan and an overall estate plan.

A financial advisor can be a great choice or an unnecessary one depending on who you are, the type of funds you have, and your ability to make sound financial decisions for your future.

Pros and Cons of Hiring a Financial Advisor

To help you break it down even more, here are some pros and cons of hiring a financial advisor.

Pros for Hiring a Financial Advisor

  • You have an expert who will guide you through confusing financial plans
  • You will always have an advocate for your financial matters
  • You will save time and effort by allowing someone else to manage your affairs
  • You can be as hands-on or hands-off as you wish

Cons of Hiring a Financial Advisor

  • If you don’t have many different investments, a financial advisor might not be necessary
  • Financial advisors are an added expense that you may not be able to afford
  • A very small number of financial advisors are unscrupulous

How can you find a good financial advisor?

The best way to find a good financial advisor is to ask your trusted friends, colleagues, and family members who they recommend.

You cannot overestimate the importance of personal experience regarding something like finances. You can also look online for reviews for local financial advisors.

Once you have your list of possible financial advisors, give each one of them a call.

Have a list of questions ready to ask each one.

First, ask how they are paid. Look for financial advisors who are fee-only. These advisors charge a flat rate rather than a commission on trades. This assures you that the advisor will be working in your best interest rather than theirs.

Second, ask the advisor exactly what they would do to help you that you aren’t already doing yourself. They should be able to give you a brief answer that includes whether they abide by a fiduciary standard.

After you have talked with the financial advisors on your list, choose two or three to meet with in person. They will ask to look over your portfolio and discuss your future goals.

They should be able to provide you with some material that you can look over regarding their successes in financial planning.

In the end, you will choose a financial planner based on who you feel is the best fit for the right price.

Going through the laborious process of ensuring you have the right financial advisor for your needs will be worth it.

Key Takeaways

Future planning is a must for all nurses though it can be much to consider.

If you’re ready to start planning your retirement, consider using a financial advisor to help you out.

Go here to find a financial planner so you can get started planning for tomorrow TODAY!

Find a Finacial Planner!

Retirement planning can be very difficult, not to mention complicated. If you don’t want to deal with it, you need to hire a financial advisor you can trust to help guide you on the journey.

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