Tag Archives: Retirement Savings

How to Diversify Retirement Savings

 

Saving is vital to a happy retirement, and the key to saving is diversifying your portfolio. As the old saying goes, “Don’t put all your eggs in one basket.” In this case, we are speaking about your nest egg. The idea is that by investing into different applications you can save yourself from financial ruin. If your eggs are all in different baskets you still have some when a single basket gets crushed. Below are several different ways to save for or during retirement.

 

Stock Market

Varying your stocks to include an assortment of investments will help to offset the chance of all stocks bottoming out simultaneously. You may want to consider asset allocation and index funds, among other options. Be aware that this should be far from your primary retirement savings form. While you can earn serious money on the stock market, you can lose it just as quickly.

 

Cash Savings

Cash savings is typically people’s primary form of savings because it helps provide a cushion should other investments fail, lose money, or need to be sold off. Cash never goes out of style. The best part? These savings have already been taxed, so it is kind of like having free money in retirement.

 

Real Estate

Selling your home can provide a considerable lump sum at the start of retirement. Alternatively, you could consider a reverse mortgage where money is borrowed against the equity you’ve already paid into your home. Another option is to rent out your spare bedrooms, or even consider purchasing investment properties to rent out.  

 

Certificate of Deposit Accounts

Certificate of Deposit accounts are better known as simply CD’s. This is a very easy way to earn a small amount of interest. The exact number fluctuates based on the account and how long the money is left inside, but typically ranges anywhere between one and four percent. The drawback is the money can not be touched for the agreed upon term, which can range anywhere from three months to five or more years.

 

Social Security

SSI is earned by meeting a certain number of work credits. If eligible, you can begin to receive social security checks upon retirement. Keep in mind this should not be your only source of income, because SSI is notoriously low.

Unfortunately, many people nearing retirement wrongly believe these checks will cover all their expenses and fail to plan for other sources of income or savings.

 

Working

The final option is to work part-time while in retirement. This may sound a bit redundant, but many people find they enjoy having a small schedule to stick to it. It not only helps supplement income, but keeps seniors busy, allows them to socialize, and generally gives them something to look forward to each week.

You can even work part time and still receive SSI. Just make sure you check the current laws and regulations against supplementing your SSI checks before signing any employment paperwork.

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How to Give Your Retirement Savings a Little Jolt

 

Saving for retirement is a necessity, but many of today’s consumers have found that saving enough is more difficult than they expected. You have to be motivated to save that money, and you have to be certain about your goals, too. Once you do this, there’s no end to what you might accomplish. Here, you will learn about two very important ways in which you can boost your savings over time and ensure a happy retirement.

 

Save as Much as You Can

It may seem a little obvious at first but saving as much as you can is one of the two best ways to improve your retirement funds. EBRI, a retirement research organization, found that nearly 43% of Americans today will not reach their retirement savings goals. This is about the same number of people who don’t have access to things like 401(k) plans and retirement pensions, and it poses a significant issue.

Many of today’s consumers think they are saving enough money, but they simply are not. The biggest culprit? Failing to account for inflation. In the US, monthly inflation rates range from 0.25% to about 0.5%, which is sizeable and significant. As of 2016, the United States ranked tenth in the world for yearly inflation, too. When you think about the amount of money you need to save, it’s important to consider inflation as you do the math. Without it, you might find yourself significantly short when retirement day comes.

Don’t Touch the Funds Until You Retire

The other way that you can save the money you need (and then some) is to avoid touching your retirement savings before you retire. Again, it may seem like a no brainer, but a surprising number of people tap into their retirement funds early – and they pay the price. Millions of people all across the country are continuing to cash out their 401(k) savings, and the penalties for doing so are severe. People are also cashing in their life insurance policies, cancelling CDs and IRAs, and otherwise failing to leave their savings alone.

Though it can be difficult to struggle financially when you know you have thousands of dollars tucked away in a retirement account, per the experts, its best to pretend like your retirement money simply does not exist. If you tap into it once, there’s a very good chance you’ll tap into it again – and again, and again. Before you know it, your retirement savings has been eaten away in withdrawals and penalties, and you are left with little to no nest egg to help facilitate your lifestyle once you retire.

If you want to truly give your savings a boost, you need to do two things. First, save as much as you can. Rather than taking a frivolous trip or buying something you don’t need, put it in your retirement savings, and consider inflation when setting goals. Second, no matter how tempted you might be, never touch your retirement accounts before you actually retire. These two things will ensure that once your retirement date comes and goes, you’ll be able to live happily ever after.

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Is the Current Level of Retirement Savings an Issue?

 

 

Virtually everyone is aware of how important it is to save for his or her retirement years. However, numerous amounts of employees in their late 30s, 40s, 50s and even 60s continue placing their retirement at risk because of not doing so. In fact, just over 40% of Generation X and the baby Boomer generation have not even started building their retirement nest eggs yet. This is obviously a huge concern for the Baby Boomers simply because they are a lot closer to retirement age and therefore have less time to catch up.

 

Now is the Time to Start Saving

Regardless of your age, if you have been employed for a while and you haven’t put any money aside for retirement, now is the time to start doing so. If you don’t, there is a strong possibility that you will not have enough money to live on during retirement – or in more severe cases, you may not even be able to afford to retire in the first place.

 

Don’t Rely on Social Security

Several working adults put off saving for retirement because their living expenses are so high. However, there are many others who couldn’t be bothered to save because they think that they will be able to rely on Social Security instead.

Contrary to belief, Social Security simply cannot provide enough money for you to live on after you stop working. In most cases, the amount provided will barely cover your rent or mortgage payment. Research has shown that in most instances, Social Security benefits will cover approximately 40% of your previous income – assuming that benefits will not be cut at some point in future.

Not only do most adults require approximately 80% of their previous income to live on when retiring; several retirees also end up spending more money when their career paths end. For one thing, most seniors end up having to pay out more for health-related expenses – it’s been reported that the average healthy 65 year old couple can be expected to spend upwards of $400,000 on medical care during this time of their lives.

 

What This Means

In short, you need to start saving for retirement immediately. If you save a good amount of money each month, and do so consistently until retirement, you should have more than enough time to catch up. However, you must keep in mind that the longer you wait to start saving, the more you will need to set aside each month – thanks to compounding interest in your 30s.

As you can see, it is not too late to start saving for retirement if you do so now. Regardless of your age, you simply cannot afford to put this off any longer. You will need to start cutting non-essential expenses, budgeting more accurately and doing whatever else is required so you can free up money to put towards your retirement. If you would like to learn more about planning ahead financially for your retirement, contact our team today.

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Retirement Savings Facts you Should Know About

 

Retirement is something that all of us (hopefully) will enjoy at some point. As such, everyone should have a plan in place for saving toward retirement. To better understand how to plan for that milestone, here are some retirement savings facts you should know about.

 

Age Plays a Factor

Women who retire at age 65 will on average need enough savings to last them another 20.6 years. Men require slightly fewer funds-just enough for the next 18 years or so.

Future generations might not need to stretch their retirement funds quite as long. Full retirement age is currently 66; however, it will increase to age 67 for those born in 1960 or later.

Seniors must account for health care costs regardless of their life expectancy or when they begin drawing funds. The average 65-year-old retired couple should plan to spend an additional $275,000 on health care. This does not account for the cost of a nursing home or other long-term health facility.

 

Disappearing Pension Plans

At one time, corporate pension plans were very common. Even so, information derived by USA Today from the Employee Benefit Research Institute shows that such plans might be disappearing. Currently, only 13% of workers in the private sector are contributing to a pension plan. That is a significant drop from 1979, when 38% of private-sector employees participated in a pension plan.

Some economists claim that fewer people now have access to an employer-sponsored 401(k) or similar retirement plan. Among low-income households, only 35% have access as compared to around 80% of all high-income households.

 

Income from Many Sources

Retirees these days are not relying solely on Social Security income alone. Over one-third (34%) are still in the workforce or are self-employed. Another 20% are drawing from pension or savings plans, while 9% have assets from income.

Fidelity advises clients to replace 45% of their pretax earnings with savings. Along with Social Security, this should be sufficient for anyone earning between $50,000 and $300,000 annually. To maintain one’s lifestyle, Fidelity claims it is only necessary to replace between 55% and 80% of annual earnings.

 

Millenials are Better Prepared

Surprisingly enough, millennials are preparing themselves for retirement quite well despite having unprecedented amounts of student loan debt.  A survey performed by Bankrate shows that 60% of all millennials have cut spending in an effort to save more money. Concerns about their job security and the economy were thought to have influenced savings as well.

The increased savings means that millennials now have more money saved than their parents did at the same age. In 2016, families with a head of household younger than 35 had an average of $12,300 in savings. In 1989, that same family would have had only $7,500 in savings (after adjusting figures to account for inflation.)

There’s no better time to begin retirement planning than right now. Use the facts listed here along with information from your financial planner or retirement specialist to come up with a plan that is just right for you.

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Easy Ways to Save Money for Retirement

Saving money for retirement often feels like an impossible task to many, especially when it seems like so many live from paycheck to paycheck. Nonetheless, saving for retirement is possible, and chances are good that you will not even miss the little bit of money coming out of your paycheck.

#1 – Sign Up for a 401k Account

A 401k account is by far one of the best and easiest ways to put money away for your retirement. If your employer offers it, all you have to do is fill out a form and determine how much money you would like to deduct from your paycheck each week. You can choose a flat dollar amount or a percentage of your earnings, and the best part is that your employer will often match your contribution up to a certain amount of money or percentage. For example, you may opt to contribute 6% of your earnings each week, but your employer may only match you up to 5%. Either way, it adds up over time and provides you with an excellent way to save.

#2 – Open an IRA (Individual Retirement Account)

Although you can always just open a savings account and start making deposits, IRAs are better than traditional savings accounts in a number of ways. If you are not yet 50 years of age, you can contribute up to $5,500 into your IRA; those over age 50 can contribute more. IRAs give you tax advantages that traditional savings accounts do not, so you will need to be sure that you understand the differences between traditional and Roth IRAs since each one comes with a different tax treatment for your contributions and withdrawals.

#3 – Keep an Eye on Your Social Security Benefits

One of the biggest mistakes you can make involves assuming that your Social Security benefits will cover all of your post-retirement needs. The average American only brings in between $12,000 and $15,000 per year via Social Security after they retire, and that is well below the poverty line. Although Social Security is a great starting place, it will not allow you to retire comfortable if you do not supplement it. The Social Security Administration’s website can help you determine your estimated benefits at various ages with its retirement estimator tool.

#4 – Never Touch Your Retirement Savings

While IRAs and 401k accounts provide an excellent way to earn interest on the money you contribute over time, you might feel tempted to take a little money here and there to help you cover emergency expenses. Don’t. Withdrawing early from an IRA or 401k account has some pretty steep penalties, and in some cases, you may even get hit twice – once when you withdraw, and again come tax season. Save money in a traditional savings account to cover emergency expenses. Most experts recommend keeping an amount equal to at least three months’ of your household’s income in savings.

Saving money for retirement does not have to be a difficult or painful task. In fact, in most cases, you can have your contributions withdrawn from your paycheck before they are taxed. For now, you might not even know it is missing – but in 35 years, it adds up and provides you with a comfortable nest egg.

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