How to Protect My Retirement Savings
You have spent the majority of your life working for a living. "How to protect my retirement savings?", may be a question you have recently been asking yourself. Because when the time comes for retirement, you want to make sure that the money you have been saving will be adequate to last for the rest of your life.
Recent current events, such as the coronavirus pandemic and ensuing stock market fluctuations have made many people uneasy, especially if their retirement account balances have dropped. The money you have stowed away for retirement should be protected at all costs.
One of the best ways you can prepare for market volatility is by creating a retirement plan with the help of a professional financial advisor. Their guidance can help you get on the right track to a successful retirement. But, there are other factors you can consider when deciding how to best protect your retirement savings so you can enjoy a truly fulfilling retirement. Read on to learn more:
Avoid Making Rash Decisions After Market Fluctuations
Pre-retirees and everyone else with investments should understand the market is likely to undulate quite significantly as a result of economic, governmental, and societal phenomena. It is tempting to want to sell after significant market spikes and also after considerable declines yet these rash decisions may not work in an investor's favor. As is often said, slow and steady wins the race.
By remaining true to your unique investing strategy brainstormed with the help of your financial advisor, you stand a good chance of meeting your retirement goal as planned. The moral of this story is to be confident in your investments as opposed to neurotic and obsessive.
Check-in on the stock market a couple of times per month rather than on a daily basis. Give your money a chance to work for you across the long haul and you will likely be more than impressed with the returns as your golden years approach.
At Prime Wealth Advisors we believe financial peace of mind is priceless. We are a group of dedicated advisors that can help you with all areas of your financial life: retirement, taxes, estate, investments, and risk management.
Plan Ahead For The Inevitable Tax Burden
The manner in which you invest impacts your tax obligations in the current years as well as subsequent years. Your financial advisor can help you minimize your tax burden both in the present and future. This financial expert understands the best strategies to plan ahead for potential taxes down the line.
As an example, parking money in a traditional IRA empowers you to deduct contributions from this year’s tax return. However, taxes are to be paid after the money is withdrawn in retirement so be sure to plan ahead for that tax consequence down the line.
Alternatively, ROTH IRAs require payment of taxes now on the money contributed to the account yet taxes are not paid when the money is withdrawn during retirement. Your financial advisor will help you sort through the many different retirement account options and craft your tax mitigation strategy accordingly.
Inflation may very well occur in the years moving forward as the federal government continues to print dollars in an attempt to prop up a struggling economy. Inflation has been known to raise home values yet also makes everything else more expensive and can diminish the value of savings.
If the US economy goes into an inflationary period, this will likely outpace any interest rate available through bank savings accounts. Furthermore, inflation can make life that much more expensive to live once you reach retirement age. Your financial advisor is here to help you design an investment strategy that accounts for inflation so your nest egg outpaces this devaluation of money as time progresses. Prepare accordingly and inflation won’t make nearly as much of an impact on your retirement spending power once you reach your golden years.
Consider Investment Options Outside Of The Stock Market
Too many pre-retirees assume the best and only way to invest their life savings is through stocks, mutual funds, and ETFs. Stocks are quite risky compared to most other investment vehicles. Your financial advisor is here to guide you through the many different options to build your nest egg.
Examples of investment opportunities outside of the stock market include:
- Money market accounts
- Savings accounts
- Fixed annuities
- Precious metals
By diversifying your savings across a litany of investment vehicles you won’t be overly exposed to the whims of the stock market. The stock market can have volatility, up and down. This is precisely why every pre-retiree should consider less volatile investment options even though many have fees and a comparably may have a lower potential rate of return.
Asset Allocation Should Account For Your Remaining Years In The Workforce
If you are in your 50s or 60s, it may be wise to put the majority of your savings in investment vehicles with minimal risk. By investing in CDs, money market accounts, low-risk mutual funds, and savings accounts you may be better able to protect your nest egg in the years and months leading up to retirement. Alternatively, those in their 30s and 40s can afford to be slightly more aggressive as they have that many more years remaining in the workforce.
Lean on your financial advisor for asset allocation guidance and keep your unique time frame for retirement in mind at all times. In general, most financial advisors recommend putting 60% of savings in stocks and 40% in cash, bonds, and money market accounts. However, these percentages can differ quite a bit based on the unique needs and risks tolerances a person has on their timeline for retirement.
Prepare For Cost Of Living Hikes
Though Social Security payments should be adjusted for cost of living increases across posterity, there is no guarantee these payments will be properly adjusted for potentially rampant inflation going forward. Living is likely to prove costlier as we move forward into an uncertain future with considerable inflation. Your financial advisor can help you select growth-oriented investments that mitigate inflation in the years ahead, ensuring your savings prove adequate in spite of the inevitable cost of living increases.
Eliminate Financial Liabilities So You Can Stay Invested
It will prove awfully difficult to save for retirement if a considerable portion of your earnings is redirected toward paying down debt. Aggressively attack all forms of debt and establish an emergency fund with at least a few thousand dollars. Once these financial liabilities are removed from the picture, you are likely to have the flexibility necessary to properly fund your retirement savings accounts. After all, you cannot predict the future.
It is quite possible your employer will experience a downtick in business. There is also a chance you will suffer an illness or endure another financial setback in the years ahead. Weathering the financial storm, let alone saving for retirement, will prove that much more challenging if you are laden with debt and lack an emergency fund.
For more ways to plan for the retirement you want, contact Prime Wealth Advisors for a complimentary consultation today. We are here to assist with full-service retirement planning to include: tax, estate, and wealth management.