No financial goal is as important as planning for a secure and comfortable retirement. But, that’s not all it takes to reach your goal – it requires more than just contributing to a retirement account. It’s all about making smart, proactive financial decisions that will get you to where you want to be financially in the long run.
There are key financial moves you can start making right now to build a healthier retirement, to make sure you’re on the right track. These moves work to maximize your savings, minimize financial stress, and make sure you have the resources you need to live comfortably when the time comes. Here are a few of them.
Spread Your Money Around
A diversified investment portfolio is important for the long term, reducing risk, and having maximum returns. Slicing your investments across stocks, bonds, and real estate, helps ensure that market volatility will not impact you too much. Your portfolio allocation can be adjusted depending on your risk tolerance so that it grows over time.
Collect Social Security Benefits
When you’re eligible to start collecting Social Security, it sure would be nice to start collecting as soon as possible, but waiting until you reach full retirement age, or even beyond, can increase how much you receive every month. About 8 percent more of your monthly benefit is payable for each year you delay receiving benefits after your full retirement age.
Your Will and Estate Plan Needs Review
One of the most overlooked, but most important steps to a financially secure retirement is making sure your estate plan is in order. A will, a power of attorney and healthcare directives make sure your assets go where you want them to and your family is ready for whatever may happen. As these documents are critical to your life, they should be regularly reviewed, even when there are no life changes.
Invest in Health Insurance
Retirement planning includes major healthcare costs of later years, as after retirement, healthcare can be one of the biggest expenses. Make sure you have a good health insurance plan that will cover you today and tomorrow. If you’re still working, make sure you take advantage of any employer sponsored health benefits.
Pay Off High-Interest Debt
Credit cards and other high interest debt can also eat away at your savings and keep you from building wealth for retirement. This debt should be paid off as quickly as possible. Once you get rid of high interest debt, you will have more money to save for retirement.
Set Up an Emergency Fund
One of the best ways to protect your financial stability now and in retirement is to have a solid emergency fund. This is a safety net against financial emergencies — medical, car repair, home — anything that knocks you off center. Your emergency fund should be big enough to last you from three to six months.
Regular Reevaluation of Your Budget
Any financial plan begins with a budget, and tracking your spending allows you to make sure you’re living within your means and saving enough. A good way to determine areas in which you’re overspending or areas in which you could cut costs is to reevaluate your budget on a regular basis. Your budget should change as your income changes or as your financial goals change.
Maximize Contributions to Retirement Accounts
One of the best ways to build wealth for retirement is to regularly contribute to your retirement accounts. Contributing to a 401(k), traditional IRA or Roth IRA is a great way to maximize your contributions and your contributions will help you take advantage of compound interest and tax benefits.
Consider Downsizing Your Home
When you get closer to retirement, it’s not a bad idea to reevaluate if your current home is the right fit for you. Most retirees decide to downsize in to a smaller home or relocate to a cheaper part of town. In addition to reducing your monthly housing costs, selling a larger home, can allow you to free up equity that you reinvest in your retirement accounts, or use towards other financial goals.
Check out Passive Income Streams
Not only does saving and investing build a retirement, but building passive income streams can also help you retire early and have a healthier retirement. It’s money that you earn with little to no additional effort such as rental income, dividend income from investments or income from a side business
Take Advantage of Employer Retirement Benefits
Most employers provide further advantages for employees to save for retirement, like profit portion plans, defined remuneration commitments, or worker stock obtain programs. If the employer will match contributions, take full advantage of these benefits by contributing what you can. Contribution from your employer to these programs are essentially guaranteed income and can give your retirement savings an added boost.
Reconsider Your Investment Strategy
The closer you are to retirement, the more you should reassess your investment strategy. Sticks are termed high risk high return instruments while investing in stocks can give higher return opportunities in the long run but comes with more risk. When you are nearing retirement age, you might want to start to reduce your risk in your portfolio with less risky investments such as bonds or dividend paying stocks.
Review Your Tax Strategy
Taxes can have a big impact on your retirement savings so you want to have a tax efficient strategy. Might as well put money in tax deferred retirement accounts such as a traditional IRA or 401(k) to lower your taxable income now. Consequently, Roth IRAs permit tax free withdrawals when in retirement.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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