Retirement Savings: You Don’t Have to Be Perfect


Not investing in the latest hot stock or trendy moneymaker is nothing to lament over. There will always be investments that made money that were not invested in or career paths that were not followed, but sticking to the basics almost always ensures success.  If applicable, invest a lump sum of cash into an investment for the greatest return.  If a person gets used to living on less money while they save, then they will definitely be on the right track for a comfortable retirement that offers many years of enjoyment.

How Not to Invest

Those who are lucky enough to have a lump sum of money to invest are often advised to dollar-cost average.  By purchasing small amounts over a longer period of time reduces the risk of buying a stock at the top market price, many claim that the risk is reduced. However, it may actually be better to invest that lump sum of money all at once.

Why Big Savers Retire Early

Everyone knows that it is vital to invest as much money early in a career, especially if a person wants to retire early.  The advantage of compounding over time is a huge benefit. However, there are other key reasons to save more money early in the retirement path. For example, saving $250 per month beginning at age 25 with an average return rate of 8% will net a retiree with over $1.7 million in their portfolio.  However, if that same person waits until age 35 to begin saving $500 per month at the same rate of return, they will only retire with a little over $800,000.  That’s almost a difference of a million dollars for saving half as much per month for ten years!

Advice for Those Worried about Washington

Many people have been very nervous with Washington for many years—especially retirees.  However, by positioning savings for long-term growth like stocks with other types of investments such as real estate, if a person’s pension does not keep up with inflation, then their tangible investments may give them some relief.

With wild market swings from record lows to record highs in the last decade, a well-crafted plan that focuses on the long-term helps to ride out the highs and lows of the market.  Those who follow a well-diversified portfolio don’t depend so heavily on Social Security or pensions.  Inflation increases mean that your retirement money will buy less than intended, but by spreading out savings over a wide area of different types of investments, the risk of succumbing to inflation decreases.

Do not depend on just a pension or Social Security for stability.  Inflation can often grow at an astounding rate, enough to have a person reduce their lifestyle in order to live comfortably.  Looking at downsizing or moving to a community that is less expensive may be an option.

Spending During Retirement

For many of those just entering retirement, which accounts to draw from first is a common question.  Should pretax or after-tax accounts be tapped first?  Should bonds or stock be liquidated?  Many CPA’s offer advices that even more than the tax bracket a retiree may fall into, the marginal rates actually matter more.  When returns are low, the amount that is removed from investments is often more important than which account the money is pulled from to minimize the negative effect of withdrawals.

Retirement Age Increases

The age that a person’s parents retired may or may not be the same age that many future retirees get to retire.  For those who are turning 62 in 2017, they will need to wait an extra two months before they get full Social Security payments.  The full retirement is slowly edging up to 67.

A Smart Retirement Tax Trick

Roth IRA conversions are ever popular with the baby boomer generation.  This strategy allows conversion of pre taxed 401(k) or IRA savings to after-tax money.  If an investor decides to undo their conversion, not only can they change their mind and make the switch back until October, but they can also reconvert again later on.  Depending on Congress, the stock market, or tax rates, this flexibility could be very valuable.

Retirement Surprises

With dreams of world travel or beginning a new career, the unexpected always happens. When asked, those retirees polled stated that the unexpected ranged from increased health, missing the team mentality of work, and death of a spouse.

Women and Retirement

A growing percentage of women are working into their 60s and 70s.  With more women climbing the ladder at their job, they are not eager to jump into retirement.  This means that women need to look at their investments and retirement savings just as much as men do.

Medicare Part B

With almost 20% of Americans age 65 and over still working, many questions are swirling around about Medicare Part A and B.  Medicare Part A for hospital coverage is free at age 65, but purchasing Part B Medicare for other expenses will depend on an employer’s health care plan.  Check with an expert in the differences in Medicare plans and the particular health care plan offered by the employer before making any decisions.  

In the words of Abraham Lincoln, “Always bear in mind that your own resolution to succeed is more important than any other one thing.”  This is true in a person’s career and retirement.

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