As a skilled tradesperson, there’s no doubt that you’ve already invested in your career, from education to building up your skills and experience. But have you thought about investing for your future by starting your retirement savings plan? Retirement planning is an essential part of financial planning, particularly for tradespeople who may not have access to employee retirement plans.
Here are five essential steps that you should take to start your retirement savings plan as a skilled tradesperson:
1. Determine your retirement goals
It’s important to have a clear understanding of what you want to achieve with your retirement savings plan in terms of goals, timeline, and lifestyle. Your retirement goals will guide your investment decisions and help you calculate how much money you’ll need to save to achieve them.
Consider your desired lifestyle and expenses, such as hobbies, travel, and healthcare costs. It’s important to note that retirement planning isn’t a one size fits all approach. Your goals are unique to you and the life you want to live in retirement.
2. Know your options
As a skilled tradesperson, you may not have access to an employee retirement plan, such as a 401(k) or pension plan. However, there are still several options for retirement savings, such as traditional and Roth IRAs, SEP IRAs for self-employed individuals, and Solo 401(k) plans. These options provide tax advantages and can be customized to fit your needs.
It’s also important to consider employer-sponsored plans, such as profit-sharing plans, which can be established by businesses of any size. This can provide an alternative to a traditional 401(k) plan and allow you to share in the company’s profits.
3. Determine how much you need to save
Knowing how much to save for retirement can be challenging. The amount you need to save will depend on your retirement goals, existing savings, and the lifestyle you want to have.
A rule of thumb is to aim to save at least 10% to 15% of your income for retirement. However, the earlier you start saving, the less you’ll need to save each year. It’s also essential to note that you’ll likely have Social Security benefits in retirement, which can be another source of income.
4. Develop a retirement savings plan
Once you’ve determined your retirement goals, options, and savings amount, it’s time to develop a retirement savings plan. Your plan should detail how you’ll save and invest your money to achieve your retirement goals.
It’s important to create a budget to identify areas where you can cut expenses and contribute more to your retirement savings. Additionally, you should consider investing in a variety of assets to diversify your portfolio and minimize risk.
Consulting with a financial advisor can help you develop a personalized retirement savings plan tailored to your unique needs.
5. Start saving early and stay committed
The earlier you start saving for retirement, the more time you have to compound interest and grow your investments. Even small contributions made regularly can add up over time.
It’s also important to stay committed to your retirement savings plan. Regularly review your plan and make adjustments as necessary. Consider automating contributions to make saving easier and consistent.
Bottom line
Retirement planning is essential, particularly for skilled tradespersons who may not have access to employee retirement plans. By following these essential steps, you can start your retirement savings plan and work towards achieving your retirement goals.
Remember, determining your retirement goals, knowing your options, determining how much to save, developing a retirement plan, and starting early and staying committed are all critical components of a successful retirement savings plan.
> For one on one or group assistance with personal finance, STR recommends that you check out the following resources:
> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
