By nature, engineers tend to be great problem solvers who may actually enjoy the challenges of retirement planning. While their retirement strategies may be similar to everyone else's, engineers definitely have some advantages, including unique training and relatively high starting salaries.

Key Takeaways

  • The analytical skills required in engineering can be put to good use in designing a retirement plan.
  • Engineers just out of school earn 15%-43% more than the median salary for college graduates.
  • An early start on saving means more time to compound, which translates into higher retirement income.

Engineers Can Create Their Plans

An engineer can use those analytical skills to create a personalized retirement plan. There are numerous online retirement planning tools to help with this process.

Retirement calculators are the most commonly used planning tool, with inputs that include the person's current age and income, their desired income at retirement, and their expected age at retirement.

An ambitious engineer may find it useful to create a retirement planning template on a spreadsheet in order to understand all the factors that go into putting together a successful financial plan. Fluctuations in investment returns and age at retirement are just two of the critical factors in a retirement portfolio’s growth.

When creating a retirement plan, it's a good idea to use an online retirement calculator.

The Need for a Comprehensive Plan

In 2019, the average retirement age for Americans was 63, according to the U.S. Census Bureau. Yet, according to a 2018 Gallup poll, the average American expects to retire at age 66, which suggests people typically retire earlier than they expect. An earlier-than-planned retirement can be attributed to a variety of reasons, including ill health and layoffs.

Engineers may have some unique career concerns, too. Computer engineers, for example, may find it challenging to compete in a rapidly-changing technical environment as they progress in their careers. It may be especially important for them to have a comprehensive and well-thought-out retirement plan.

How to Build a Nest Egg

Engineers earn significantly higher starting salaries than their counterparts in other career fields.

The median starting salary for a college graduate in 2019 was $51,784, according to usnews.com. In general, engineers can expect to earn a starting salary that is at least 15%–43% higher than this.

Here's what they can make right out of college, according to the U.S. Bureau of Labor Statistics:

  • Civil engineers: $59,720
  • Mechanical engineers: $64,956
  • Electrical engineers: $68,364
  • Computer engineers: $74,004

Starting incomes like these are a boon because it means recent graduates can start their retirement savings early, taking advantage of compounding interest to help their investments grow over time.

Using this early-career windfall, they can contribute to a company 401(k) plan at least up to the level of the employer match.

They may also have the extra cash needed to fund a separate Roth IRA account. Investments in a 401(k) plan are limited to the funds offered by employers, but a Roth IRA can be used for personalized investments, including stocks, bonds, exchange-traded funds (ETFs), or mutual funds. The advantages of a Roth, which is made up of after-tax investments, include tax-free withdrawals during retirement and no required minimum distributions (RMDs).

Many companies choose to award company stock as part of their employees’ 401(k) plans. As a rule, no single investment should hold more than 10% of any retirement portfolio. That's why experts recommend that investors rebalance their portfolios on an annual basis.

Managing Portfolio Risk

Engineers deal with risk on a regular basis, building safety into designs to ensure that a system is strong enough to handle potential threats. In the same way, they need to determine the degree of risk they want to take in building their portfolio.

Younger engineers can take on greater investment risks, creating portfolios primarily composed of stocks and stock funds. As retirement looms, they should consider the safety factor necessary to protect their portfolios in case of sudden market fluctuations. That means moving into less-risky investments, including money market accounts and certificates of deposit (CDs).

The Bottom Line

Engineers can successfully prepare for retirement using their strong problem-solving and analytical skills to build personalized retirement plans to meet their individual life goals.

And because they earn more right out of the starting gate than a typical college graduate, they can begin saving sooner and put away greater amounts, allowing their investments to compound to maximum advantage.