Retirement Planning Strategies to Secure the Future You Want
The future is yours when you have enough money to fund it, right? As you get closer to those so-called golden years, use these retirement planning strategies to build the wealth you need for a secure, joyful retirement.
You already know that you should start planning for retirement as early as possible, and that you should contribute the maximum amount to your employer-sponsored retirement plan. But what other strategies should you be putting into place as you approach retirement? Here are some of our top recommendations.
Maximize your retirement accounts through catch-up contributions.
If you’re 50 or older, you are allowed to contribute more than the standard limit to your 401(k) or individual retirement accounts (IRAs). For 2020 and 2021, you can contribute an additional $1,000 to an IRA, in addition to the standard $6,000 limit; and an additional $6,500 on top of the standard $19,500 contribution to your 401(k).
Making these extra contributions can add up in significant savings for retirement.
Be willing to move your retirement age.
There are a couple of reasons this strategy may be recommended: As you continue to work, you’ll generate more income, which means you can contribute more to your retirement accounts (and continue to reap the benefits of company matching, if that is an option available to you).
The other reason is that by delaying retirement until age 70, you can increase your Social Security benefits by 8% each year. Even though payments from Social Security won’t sustain your retirement, maximizing what you do get paid can add up. If you’re married, you’ll also want to be strategic about collecting Social Security based on whether you or your spouse earn a higher income.
Develop a relationship with a financial advisor you trust.
A qualified wealth advisor is there to help you navigate all the complexities related to building wealth as you plan for retirement, including offering investment advice, portfolio management, tax planning, and legacy and estate planning. He or she will be able to assist you in managing risk at different phases of your plan, and make changes to your strategy when needed.
Just as valuable is the relationship aspect and the long-term outlook that your wealth advisor can offer. Keeping you — and your plan — on track and grounded through market upheavals and unexpected scenarios is one of the things that they do best.
Don’t avoid the stock market.
It’s true that investing in equities comes with risk, but that doesn’t mean you should avoid it altogether or that you should be afraid of it. Stocks can generate large returns, and so while you may not want to be heavily invested there, you could still benefit from investing a percentage of your portfolio in stocks.
Because your retirement could potentially last for 30 years or more, you may still have time to generate big returns and recover losses. Your wealth manager can advise you on the appropriate mix of retirement investments based on your time horizon and tolerance for risk.
Look for low-cost investment options.
Retirement fund fees — the costs of managing your investments — can be significant and cut into your returns. Low-fee options do exist, however. You can view all the fees you’re currently being charged in the disclosure documents you receive, and often funds publish detailed data about their fees.
One sure way to minimize fees is by working with a fee-only advisor. Fee-only advisors are not compensated through a commission model, so there’s no conflict of interest in the investment recommendations they make.
Determine your withdrawal plan.
Consider what you’ll need to withdraw from your assets as retirement income. Many experts recommend 3% to 5% of your savings in the first year that you’re retired, then adjusting for inflation. How much you need to withdraw will depend on your lifestyle, but you’ll also need to plan for unanticipated expenses and healthcare needs.
Do all you can to stay physically healthy.
Yes, your physical health is closely related to your financial health. Healthcare is increasingly expensive, so when you take steps to maintain a healthy lifestyle — eating healthfully, getting frequent exercise, seeing your doctor regularly, and ditching bad habits like smoking — you help preserve not only your physical wellbeing, but your savings, as well.
When you maintain a healthy weight and do all you can to avoid disease, you’ll also protect your future by limiting what you’ll need to spend on healthcare in retirement.
Do you want the assurance that you’re doing all you can to build the wealth you need for retirement? Talk to us at Ironwood Wealth Management. Our advisors have the expertise to recommend the specific strategies you need at whatever phase of planning you’re in.