5 Savvy Ways to Retire With More Money
With longer lifespans and skyrocketing healthcare costs, saving plenty of money for retirement is more important than ever. However, inflation, stagnant incomes, and other economic factors can make this a challenging endeavor, which is why the vast majority of Americans are on track to come up far short of their income needs when it comes time to retire.
But despite these challenges, it is possible to increase your retirement savings, and build a stable retirement plan that you can count on.
Here are 5 tips to help you retire with more money, courtesy of Investopedia.com:
1.) Find the Right Balance
If you are investing in stocks, you will want to make sure that you are protected against losses – especially as you near retirement. This means you should have a well-diversified portfolio, with plenty of safer fixed assets that aren’t subject to market volatility. Various bonds, fixed annuities, and whole life insurance are all options that you may want to consider including in your retirement portfolio to mitigate against losses. As you draw closer to retirement, you will want to adjust your allocations to focus more on safety. The options are many and varied, and creating a comprehensive plan to achieve your retirement income goals can be quite complex, which is why you should seek the advice of a trusted financial advisor who can help you to create a plan that works for you, and keep you on track to achieving your goals as you near retirement. Remember that your goals are likely different from your neighbor’s, so you will want a customized plan that is designed specifically to help you get to where you want to go.
2.) Work Longer
This may seem obvious, but many people plan on retiring earlier than they need to. While early retirement may be tempting, you could end up in trouble in your later years, when it may not be possible to go back to work due to health reasons or other factors. If you are healthy and able, working longer is one of the best ways to have more money saved for retirement. Not only will you be able to save more by spending more years in the work force, but you will also delay or reduce withdrawals from your retirement savings during those extra working years. And you may increase your Social Security benefits as well (see #3 below).
You could also go ahead and retire, but keep working part-time for a while, which can achieve the same goals, while giving you more free time to enjoy some hobbies and fun activities while you are still fit and healthy.
3.) Postpone Filing for Social Security
You can start collecting Social Security benefits as early as 62, but by waiting longer, you will in essence increase your returns by 8% for every year that you wait. If you wait all the way until Age 70 to claim benefits, you will substantially increase the income you are able to collect from Social Security over what you would have collected at Age 62. Thus, it makes sense to wait as long as you can before you begin collecting benefits. If you are still working during this time, it could also potentially increase your benefits through adding those additional working years – especially if you are earning a good income.
4.) Downsize Your Lifestyle & Invest In Your Future
As financial advisors, we often warn our clients of the dangers of “Parkinson’s Law.” Humans have a tendency to spend whatever they have available – both in time and money – and this is one of our greatest downfalls when it comes to saving. If you can discipline yourself to live within your means, and downsize your lifestyle when you have the opportunity, this can substantially increase the amount of money you have available to save. For example, when your children move out on their own, you can often move to a smaller home, which will save you money on your mortgage and other home expenses, and reduce your property taxes. If you diligently sock those savings away into your retirement plan, it can make a substantial difference in the size of your nest egg.
If you are still working full time, do your best to cut your expenses enough so that you can save at least 10% of every paycheck. Put these savings into a fixed vehicle or cash, rather than risky investments, and you will essentially be getting a 10% return on yourself every year. Remember that when it comes to retirement savings, return on your money is not as important as the return of your money! Having savings on hand that you know you can count on for emergencies – as well as your future retirement needs – can provide you with a peace of mind that is not quantifiable in financial terms. (This is just one reason why we recommend the Bank On Yourself strategy.)
5.) Don’t Chase Returns
Lastly, as we touched upon in point #4 above, returns shouldn’t really be your main focus when you get close to retirement age. Many people panic when they hit their late 50’s and early 60’s, and realize they don’t have nearly as much saved for retirement as they had anticipated. Unfortunately, this often leads to high-risk investments at exactly the wrong time. The last thing you want at this stage of life is to lose your hard-earned savings due to reckless investment decisions. Instead of focusing on maximizing your investment performance, focus on the amount of income you will actually need to maintain a realistic lifestyle during retirement. Then, make strategic and calculated moves to accomplish this goal. Remember to consult with your financial advisor before making any changes to your strategy. A cool-headed and knowledgeable third party can take the emotion out of your retirement plan, and make sure you don’t make reckless decisions that could hurt your results.
And remember that things change often – especially in the financial markets – so it is important to reevaluate your portfolio and retirement strategy on an annual basis. This is why we like review all of our clients’ financial plans at least once or twice a year. We want to make sure you are staying on track to achieving your short and long-term financial goals – including a secure and comfortable retirement!
Would you like to speak with one of our retirement planning advisors to make sure you are on the right track, or help you find ways to save more for retirement? Contact us today for a FREE Retirement Strategy Session!