7 Tips to Start Improving Your Retirement Strategy
Updated on Dec 29 2018
Retirement can be a fun life stage as you transition to a more relaxed lifestyle with new priorities. In order to enjoy a stable retirement with financial peace of mind, though, you need to have a retirement strategy that aligns with your retirement goals. Here are tips to improve your retirement strategy
Retirement is that stage where you envision yourself sipping a margarita and sailing away in a cruise ship, enjoying great views, wonderful sunsets and just generally enjoying a life well-earned. You may be looking forward to having more time with friends and family, more time to travel and a more leisurely lifestyle. In order to enjoy a great retirement, though, you need to be financially prepared.
Educate yourself and protect your investments so you will enjoy the blissful years to come. Here are seven tips to help you improve your retirement success:
1. Reduce the costs and fees
One of the best ways to lower the cost of retirement is to pay off the mortgage of your home to eliminate the monthly mortgage bills. Although you will still be paying taxes and home maintenance, these will be a fraction compared to mortgage costs. You can also opt to downsize to a smaller home and possibly transfer to an area with a lower cost of living.
Try to avoid retirement penalties by being aware of important retirement deadlines. Also, review your Medicare plan and consider purchasing a supplemental policy to cover what is not included.
Keep in mind that retirement offers additional savings opportunities. For example, you can get senior discount deals on tickets, on entrance fee, and many items. Always check to see if a discount is offered to seniors. Also, retirement allows for less expensive and less crowded off-peak season travel.
2. Review our investment risks
Inflation is one of the risks of living on a fixed income. High inflation rates can seriously affect the savings of retirees. Retirees should consider investing in assets that protect from inflation such as Treasury Inflated Protected Securities and products with cost of living adjustment features.
Lower interest rates also affect the spending power for retirees by lowering growth rates for savings accounts and assets. A low-interest rate may require retirees to have additional savings just to have adequate retirement funds.
Stock markets can also prove risky and losses can severely reduce retirement savings. Early losses in the first years of investment mean less income during retirement. Retirees should go for a balanced asset allocation strategy when choosing a stock market portfolio.
3. Wipe out debts
It is ideal to be out of debt once you enter your retirement, so have a plan for your mortgage/s, car loan/s and credit card debts before you retire. Once you retire, your biggest wealth-building tool is your savings and for your savings to grow during retirement, you need to eliminate your debt.
If you are paying off a car loan, consider a less expensive car to reduce or eliminate car payments. You can check out personal loans online for better interest rates than the one your bank offers. You may also consider putting off buying luxury items or trips to pay off a credit card bill. By making strategic changes in your lifestyle, you can transition into retirement, debt free.
4. Don’t miss out on catch-up contributions
If you feel behind on your retirement planning, take advantage of catch-up contributions. Catch up contributions allow you to make additional contributions to your individual retirement accounts (IRAs). If you are an employee there is a popular employee sponsored 401k catch up contribution. In some companies, they would match up your contribution with a certain percentage, for example, as much as 6 percent. Catch up contributions are tax-favored retirement accounts and you will be enjoying a larger principal, earnings and interest.
5. Be tax efficient
Just as tax efficient investments yield lower returns, they incur fewer taxes. Common stocks are tax efficient especially when held in tax-deferred accounts; they are taxed at the long-term capital gains rate if held for more than one year. A new trend that is catching up on retirees is using Health Savings Accounts (HSAs) as a retirement fund. HSAs can act as a powerful investing tool of you let interest compound over time. Like an IRA or 401k you contribute pre-tax dollars and the money grows over time. You’ll pay taxes only when you withdraw the money and for medical expenses, you get to take out your money tax-free.
6. Don’t use your retirement savings
Keep your savings intact as much as possible so you can get the full benefits of earnings and interests. You will also lose tax benefits and will have to pay withdrawal penalties if you withdraw your retirement savings early. Keep your retirement plan intact when you change jobs, by keeping it current with your new employer.
7. Get a retirement job
Getting a part-time job during your retirement offers many benefits. From having a place to go to giving you purpose and extra income and socialization; a side-job during retirement is becoming more popular for many Americans.
The reality is that people are living longer today, need more income to cover expensive retirement costs, such as healthcare and long-term housing, and need a routine. Working longer not only increases your retirement fund, but can also improve your quality of life.
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