If you have found yourself thinking about retirement lately, you aren’t alone. Many Americans of all ages are beginning to think into the future and plan for what their financial needs may be. With that in mind, what can you start doing today in order to prepare for your future retirement needs? We have a few tips you can start now to give you an extra boost.
Assess Your Current Finances
A major piece of planning for your retirement is being able to look around at all your debts, income, and whatever else to determine what is going on. You should be able to spot where your money is being invested, check how the investments are doing, and scrutinize what you have given. You can use online retirement calculator tools to check if you are on the right track for having the money you want in retirement. Of course, you can also meet with us and have our team take a look at your financial status if you aren’t sure where to begin.
Learn the Rules
We know that the rules of retirement financing may seem a bit complicated, but understanding them at a surface level can help you go far when making financial decisions. Get the details on some of the specifics! For example, should you be in a Roth IRA or a traditional IRA? One has tax-deductible contributions while the other offers you tax-free withdrawals. Also, Social Security has different claiming strategies, and the file-and-suspend loophole is over. As you inch ever closer to retirement, check your Social Security account to see how you might be able to make your monthly checks bigger. Keep in mind that for every year you prolong retiring after age 62, your monthly check will increase.
Interest Rates Rising
The Federal Reserve has been increasing interest rates, but there is good news about this: there may be a rise in the returns on your traditional savings or money market account. Of course, this process will be slow, as certain institutions will be more conservative in passing along rate increases. Keep in mind that anything is better than zero!
Have a Cash Backup
We will be honest—investing all your money in the stock market as you go into retirement is a terrible idea. What if you plan to retire on December 1st, and the entire stock market comes crashing down on November 30th? Or what if there is a major crash after you retire? Many experts recommend keeping about two years’ worth of liquid savings in your bank account so you could easily meet your expenses and not have to sell your investments at the worst possible time. A few years before you decide you are ready to take the retirement plunge, consider redirecting your contributions for retirement into cash investment options instead of mutual funds.
Many people who are saving for retirement don’t know whether they should put their salary deferrals into a 410(k) or a Roth 401(k), if available. The Roth 401(k) is a workplace account that combines the after-tax portions of a Roth IRA and a standard 401(k). That’s why you should choose both. You can diversify by keeping some of the retirement money tax-deferred and some in a Roth account. When you mix things across the board, you will have a little more flexibility and room for decisions when it’s time to pull the money out of the account.
Choose Account Beneficiaries
It’s essential that you choose beneficiaries. Otherwise, your family might end up in surrogate or probate court for months. One of the best ways to avoid this emotional trauma and strain is to set aside a few hours and use that time to go through your planning documents. Do your 401(k)s, life insurance plans, and IRAs all have clearly named beneficiaries? Make your wishes as clear as possible. You may think an attorney’s letter will be enough, but this is not typically the case.
Pay Down Your Debts
It’s awfully hard to save when you have old debt hanging over your head! As you are approaching retirement time, do your best to cut down on your credit card debt and as much student debt as possible. Those of you who are closer to retirement should not have much left, so take full advantage of the money you make now to cut down on these debts!
The fiduciary rule went into effect on June 9th, and it requires all brokers and advisers who work with people preparing for retirement to put their clients’ best interests first. If you have been concerned about financial advisers in the past, we understand—however, we are legally bound to provide you with options that are right for your goals and your situation. Feel free to ask us any questions about this.
Know the Fees in Your Retirement Accounts
Find out how much you are paying in fees for your retirement accounts. The difference between an investment with a one percent fee and an investment that costs half of that could end up being thousands of dollars over the next few decades. There is not much you can control when it comes to your retirement funds. You can determine how much you put in, as well as the fees you pay for investments. We recommend just knowing how much you are paying so that you can determine if the return will be worth it at retirement time.
Save More Now
As unexciting as it is, most experts recommend saving as much as 15 percent of your salary for retirement. In order to do that, you can start by increasing the amount you save by one or two percent every time you change it. You can raise your contribution yourself on your birthday or on another significant holiday. Getting a raise is a great time to increase the amount you are putting away for retirement!
Contact Kennedy Financial & Insurance Services Inc. Today!
We want to help you with your retirement planning needs and get you to the best possible start. Contact our professionals today. We proudly serve residents of Woodland Hills, Northridge, Calabasas, and the surrounding areas. Tell us what your goals are for retirement, and we will do our best to get you on track for success. Reach out to our team now and ask us what all we can do for you. When it comes to getting your finances and your life in order, there is no better team to call than the professionals at Kennedy Financial & Insurance Services Inc. We would also be happy to provide financial advisory services, as well as life insurance!