5 Ways To Boost Your Savings If You’re Behind On Your Retirement Goals
If you’re one of the 73 percent of American workers who, according to the 2017 EBRI report, haven’t yet figured out how to save for retirement, well this article is for you. There’s no reason to be stressed or embarrassed if you’re behind on your saving. Finding extra money to put away can be difficult, especially if you’re also paying off a student loan or a mortgage or sending your kids to college, but it’s not rocket science.
Even if you’re 10 to 15 years away from retirement, it’s never too late to turbo-charge your savings plan. Here are seven simple tips to help ignite your plan so that you can achieve the financial future of your dreams.
TIP #1: GET THE FREE MONEY
If you have access to a defined-contribution plan such as a 401(k) through your employer, then you may be able to take advantage of the employer match. Every company’s matching program is different, but most offer a dollar-for-dollar match (up to a certain amount) based on a percentage of your pay. This is free money, and even if it doesn’t sound like much—the most common match is .50 cents for every dollar—it’s like getting a boosted return on your money.
TIP #2: FIDDLE WITH THE DIAL ON YOUR RISK NUMBER
It’s important to understand your risk tolerance when investing, particularly as the time of retirement nears. Your risk tolerance is the degree to which you are able to withstand the fluctuations in your investments. As you get closer to the day you retire, any losses to your retirement accounts can increase the risk of outliving your money.
The Rule of 100 is a simple way to identify your risk tolerance based on your age. Simply subtract your age from the number 100 to identify the percentage of market exposure. While there are good reasons you may want to assume a greater degree of risk than what the Rule of 100 says, it’s good to keep in mind for investors who are nearing retirement.
TIP #3: PAY ATTENTION TO THE FEES
If you’re participating in your company’s 401(k) plan, then you’re likely paying an assortment of ongoing and transactional charges, some of which may be hidden fees. Ongoing fees are assessed every year and they include the 12b-1 fee in mutual funds which can be as high as 0.75 percent. Sales charges such as front and back-loads are paid as a commission to your broker or advisor each time you enter into a transaction. Reducing your fees by just 0.75 percent can result in hundreds of thousands MORE dollars to your savings accounts.
TIP #4: TAKE ADVANTAGE OF CATCH-UP CONTRIBUTIONS
Because investments inside of a 401(k) or IRA are allowed to grow tax-deferred, there are limits on how much money you can contribute to these accounts. The maximum contributions allowed in a 401(k), for example, just went up $500 from $18,000to $18,500 annually. But there’s more good news: if you are in your 50s and 60s, you’re allowed to contribute an extra $6,000 a year. Even if you’re starting out with $0 at age 40, by maximizing your contributions in tax-deferred vehicles using the power of compound interest, you could still become a millionaire by full retirement age.
TIP#5: GET AN INCOME PLAN
Boomers are the first generation to retire with the relative certainty that they are going to live for another 20 years. They are also the first American workers to retire without the benefits of a stable pension. Study after study has confirmed that retirees are happier when they have a regular paycheck coming in that they know they can’t outlive. To achieve a guaranteed income for life payment, this money can’t be in the stock market and it can’t have an expiration date. Ideally, you want to buy yourself a pension that will continue to pay for as long as you live, and whatever money isn’t spent should be returned to your family—your spouse or your beneficiaries—instead of reverting back to a company.
Today’s newer annuities come with many benefits that old-fashioned pension plans did not have, and best of all, you can buy them using the funds in your IRA or 401(k). You don’t have to annuitize and give up control of your money in order to guarantee your income. Today’s retirees have options. Reach out to us today for your complimentary income-planning feedback. We’re happy to help – no strings attached.