When it comes to saving for retirement, most Americans fall short. After another year of financial turmoil, here are some helpful strategies to up your retirement savings game and get you back on track.
In 2021, retirement may look a bit different these days to a majority of Americans. Covid-19 has clearly had a massive economic impact on everyone, and could potentially push Americans to consider retiring early. This may mean they will retire with less saved than they may need.
Regardless of how secure your retirement plans are looking at the moment, now is as great a time as ever to review your stance in a savings strategy. Regardless of your particular financial situation, the same retirement principles apply this year as always: reduce spending, plan for surprises, make conservative decisions on retirement savings and Social Security, and keep earning income if you can.
CKS Summit Group is here with six tips to help you reach your financial goals by tuning up your retirement planning to get you in the best position possible for 2022. Some are brand new tips due to Covid-19, some are timeless tips, but all of them are essential to retirement planning—and the best advice is to get started on them as soon as possible!
Not the most ideal news and first step to being more financially secure, but by far one of the most effective. If you’re wondering when the best time to begin paying off debt is, we suggest of course starting while you’re still working. If your plan is to start making your retirement a priority during the rest of 2021 or beginning of 2022—or even if retirement is a more remote possibility—first begin with getting rid of those nagging credit card balances, car or student loans, and even mortgages. The amount of people over 60 years old with credit card debt, mortgages, and more is growing at a rapid rate. It’s extremely difficult if you’re on a fixed income to be able to pay down debt. It’s worth it to put in that extra effort and work overtime while you can to ease the debt burden later.
Another tip that has been repeated time and time again is contributing to your 401K. If you’re eligible and your employer is offering a traditional 401k plan, one advantage you may have is that it may allow you to contribute pre-tax money. To give you a working example, let’s say you’re in the 12% tax bracket and plan to contribute $100 per pay period. Because this money would come directly out of your paycheck before federal income taxes are even taken into account, your take-home pay will only reduce by $88 (plus the state and local income tax as well as health insurance). This means that you have the opportunity to invest more of your income without feeling it as much in your monthly budget.
Automate your retirement savings and have the money transferred from your paycheck to any and all of your retirement accounts. The cash you can’t get your hands on is more money for your retirement nest egg. If you’re using a 401(k) at work, you’re probably already set. If you’re investing with an IRA, make sure you’re making regular deposits that won’t exceed the annual limits.
Not only do automatic deposits keep you from having to take the time and energy to buy investments every month or week, but it also prevents you from spending money you’d rather save. It also may help you pay less per share on average, thanks to a powerful principle called dollar-cost averaging.
Thanks to Covid-19, we now know more possibilities available for potential retirement options. In fact, sometimes it doesn’t come as a voluntary option. Instead it can be due to layoffs, older workers who are at a bit of a higher risk for no longer feeling comfortable returning to work in a packed office. The current state of the world has shown us that no matter how much planning we’ve done, sometimes life does not go according to plan whatsoever and we need to make our customers prepared for anything. All of this information strongly suggests that employees in their 50s and 60s should begin to make contingency retirement plans. Hope is unfortunately not a reliable plan, so even if retirement seems far off for you, now is a great time to start making an emergency strategy for early retirement.
We understand this is sometimes an inevitable predicament to have to dip into your retirement savings, especially during a pandemic. If at all possible, try to avoid this. If you withdraw your retirement savings now, you’ll lose interest and principal and you may lose tax benefits because of this. You will most likely also have to pay withdrawal fees. If you ever happen to switch jobs, we suggest to leave your savings in your current retirement plan. Another option is to try to roll them over to an IRA or your new employer’s plan.
Safe to say the pandemic put everyone through some major hardships, both personal and financial. We all would of course like to think that would never happen again. Most likely, there will be another scenario in our lifetimes that will financially pressure us. We want to ensure you are able to handle this as smoothly as possible. We almost always face uncertainty, and this will in fact never change. So how can anyone planning for retirement account for this in a logical and financially smart way? In the moment it’s not the easiest, but one way you can start is to be very honest about how you would, or if you could, correct your course if another one of life’s many surprises (a pandemic for example) comes and impacts your streams of income.
Saving for retirement doesn’t have to be intimidating. Follow these six steps to develop your personal retirement investing strategy. By starting now and maximizing your retirement account dollars, you secure your financial future.
If you are looking to ensure you’ll have sufficient financial resources to maintain or improve your lifestyle during your retirement years, contact the retirement income experts at CKS Summit group. With our help and guidance, you can make smarter financial decisions and reach your retirement goals.
