- My dad is retiring 10 years earlier than he expected, and it made me change my saving habits.
- I realized retirement doesn’t always happen when you expect, so I increased my savings.
- I also started looking into an HSA to save more for healthcare expenses later.
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My dad didn’t expect to be leaving work in 2021 — he thought he had about 10 more years left. But, he decided to take a deal to retire 10 years earlier than expected.
He’s always extolled the merits of 401(k)s and IRAs to my brother and me, and encouraged each of us to open them up as soon as possible. Since he taught us, I had to think he’d be totally prepared for retirement, even though 10 years early is a lot of time. Which made me wonder: If I were to leave work 10 years earlier than expected, would I be ready? My answer was likely a no.
So, I made three straightforward changes to how I’m saving and investing for later.
1. I upped my 401(k) contribution
No one adjusts their 401(k) contribution more than I do, and I keep increasing it whenever I feel the nudge. While I do it at least once a year, I felt another nudge when my dad told us the news.
Since it’s hard to go wrong with saving more earlier, it felt like the right move. Retirement savings grow based on compound interest, where money saved earns money over time. Since I’m still relatively young, anything I invest now will have lots of time and potential to grow.
I like to think that I have control over a lot of things in my life, but my dad’s sudden retirement was a good reminder that that’s not always the case. Increasing my contributions even by a small amount made me feel like I was taking a step in the right direction.
2. I’m looking into an HSA
My initial reaction to my dad retiring wasn’t, “What do you plan to do with your time?” After covering these topics as a reporter, it was, “What will you do about healthcare?”
Healthcare expenses are one of the biggest costs retirees will face. For my dad, who’s retiring before he becomes eligible for Medicare at age 65, it’s even more tricky. Getting affordable healthcare in the years between retirement and Medicare age can be a huge expense. (My dad will have insurance from his job for a while, and then he’s prepared to pay for private insurance until Medicare kicks in.)
Not knowing what I’d do in this situation, I started looking into a Health Savings Account, or HSA. These accounts are a way to save more for medical expenses and healthcare costs both now and later on. The funds don’t expire and can be invested for the long-term. They’re tax-advantaged in three ways: Tax-free money goes in, grows tax-free, and withdrawals are tax-free.
3. I increased my IRA contributions, and automated the deposits
My dad’s retirement is forcing me to re-think my own goals and how I’ll get there.
In addition to increasing my 401(k) contribution, I realized I could do better with my IRA contributions. I wanted to be as consistent as possible, and contribute more. To do that, I modified my direct deposit to my IRA.
Instead of having one big chunk that comes out at the beginning or end of the month, I found that I’d be able to contribute more by putting in money weekly. That allowed me to increase what I’m saving overall.
While everyone’s retirement is different, I hope that I can prepare myself well enough for my own to be as smooth as my dad’s.