7 ways to plan for EMS retirement as a rookie
Without a defined pension plan, most providers are on the hook for saving for retirement; check out these tips to help you get started
By Lynzie Wolters and Crystal Kanada
Making the decision to enter the EMS profession can be a very rewarding and impactful career path. While this is regarded as a very honorable profession, the responsibility of having to plan and prepare for your own retirement relies on you. Most employers will not provide a pension, so you must be proactive in setting up a plan that you can stick to help ensure a successful retirement.
Here are some tips that can help you start on the right path.
- Understand the importance of early retirement planning. Since a pension may not be available, it’s even more crucial for EMS personnel to start retirement planning as early as possible. When investing at a young age, you can participate in compounding interest. Compounding interest is “interest on interest,” and this allows for a sum of money to grow faster the longer it’s invested. The greater the number of compounding periods, the greater the compounding interest will be.
- Maximize retirement accounts. You should explore different retirement accounts, such as IRAs, 401(k)s and additional tax deferred options that are available through your employer for retirement. You should also research if your employer offers a company match to your retirement account and, at the minimum, contribute what it takes to earn that employer match. When a company matches, it’s free money! The best way to get involved in contributing to these accounts is to automate the contribution. Choose a percentage that you are willing to set aside and have that come out every paycheck. The general guideline is to save 10-15% of your gross income.
- Diversify investments. Without a pension, it becomes even more important for EMS personnel to diversify their investments to help minimize risks and maximize returns. Diversification enables you to not solely rely on the success of one investment. You should meet with a financial professional who can listen to your goals and determine which accounts or investments are suitable for you to consider. However, a strategy involving diversification does not assure a profit and does not protect against a loss in declining markets.
- Create passive income streams. Another option to add more income to a retirement portfolio is to create additional income streams, such as rental properties, dividend-paying stocks or a small business. These can reduce the pressure on your investment portfolio by having additional assets to rely on.
- Consider health insurance options. If you plan on retiring before age 65 (when you are eligible for Medicare), you must consider the potential costs of paying for medical insurance out of pocket. You can explore retirement medical accounts that allow for tax deductions, tax deferral or are tax free if you use them for medical expenses in retirement. You will need to confirm your eligibility for these types of accounts.
- Optimize Social Security. When it comes time to choose an age to collect Social Security, every situation is different; it’s best to make an informed decision. You can start your retirement benefit as early as 62 or defer up to the age of 70. The longer you delay, the higher your lifetime payment will be. If you are married, you should take steps to ensure that your family has the best plan. If you are the higher wage earner in the family, delaying your benefit can result in higher survivor protection for your spouse. Talking through the pros and cons of Social Security planning is highly encouraged so you are informed of the pitfalls of this decision.
- Learn budgeting and expense management. The importance of creating and sticking to a budget can greatly help when you transition from employment to living off your investments in retirement. You will need to know your fixed expenses versus your discretionary expenses. You will want to learn how much income your assets can safely provide you and make sure that your spending is in line with this. If you are spending more than your assets can create income for you, you will want to either save more, if there is time, or work longer.
Planning for retirement should start early and should be modified over time. This can be a daunting task, so talking to a financial professional can help ease the stress that comes along with this type of planning. We all want to retire comfortably, and these tips can help get you closer.
About the authors
Lynzie Wolters ChFC® RICP® & Crystal Kanada are Registered Representatives offering securities through NYLIFE Securities LLC, Member FINRA/SIPC, a Licensed Insurance Agency and a New York Life Company, (916) 781-7480, 2999 Douglas Blvd., Suite 350, Roseville, CA 95661. Lynzie Wolters is a Financial Adviser offering investment advisory services through Eagle Strategies LLC, a Registered Investment Adviser. Eagle Strategies LLC is a New York Life company. Lynzie Wolters & Crystal Kanada: CA Insurance License Number 0I20911 & 0H92673. Capital Edge Insurance and Financial Services, Inc., is independently owned and operated from Eagle Strategies LLC and its affiliates. Information provided by Capital Edge Insurance and Financial Services is for educational purposes only. Capital Edge Insurance and Financial Services as well as Eagle Strategies LLC and its affiliates do not provide tax, legal or accounting advice. Before taking any related planning actions, consult with your own professional counsel if needed.