3 Strategies to Protect Your Retirement Savings

Concerned that you won’t be able to afford retirement? If so, you’re not alone. According to a recent study from Gallup, retirement is a major worry for many Americans. The study found that 54 percent of respondents were worried that they won’t have enough money to fund their retirement.1

A study from the Economic Policy Institute found that many Americans simply haven’t saved enough for retirement. The average American adult has less than $100,000 in savings.2 While that’s a sizable sum, it’s far short of the amount many retirees need to live comfortably.

The good news is that it’s never too late to make adjustments and boost your savings. A few simple changes to your strategy could significantly improve your odds of funding your ideal retirement. Below are three tips to help you increase and protect your retirement savings:

 

Contribute as much as possible to qualified accounts.

Do you use an IRA or 401(k) as your primary retirement savings vehicle? These accounts are popular because of their unique tax treatment. All taxes on growth are deferred until you take a withdrawal. In some cases, your contributions to the accounts may be tax-deductible.

You can take advantage of this tax-favored treatment by maximizing your contributions to your qualified accounts. In 2018 you can contribute as much as $5,500 to an IRA, plus an additional $1,000 if you are over age 50. The contribution limit for a 401(k) is $18,000, with an additional $6,000 allowed for those age 50 and older.3

Of course, you may not be able to significantly increase your contributions at one time. Instead, you could gradually raise your contribution rate over a longer period. For instance, you could increase your 401(k) contribution rate by 1 percent every year or every six months. That kind of slow increase could boost your savings without busting your budget.

 

Diversify.

Diversification is a critical element in any investment strategy. Diversification is the strategy of allocating your investments across many different asset classes. This approach minimizes your exposure to risk that’s related to any one type of asset.

Your allocation should be specific to your needs and goals. There’s no right or wrong way to diversify. The important thing is that you are diversified and that your strategy aligns with your personal risk tolerance. A financial professional can help you determine what allocation is right for you.

By not diversifying, you run the risk that volatility in one specific sector or asset class could sink your savings. Too many people focus on the most recent news, so they may overweight their allocations toward assets that performed best in recent years. That approach often results in excessive risk exposure over the long term.

 

Focus on the long term.

Finally, it’s important to remember that your retirement investment strategy is meant to fund long-term objectives. It’s not easy to watch your assets decline in value during a market downturn. However, market downturns are often temporary. If you make a rash decision and abandon your long-term strategy, you could suffer more damage than you would by simply sticking to your plan.

If you have many years until retirement, try not to focus on the short-term ups and downs of the market. If you’re approaching retirement, short-term volatility may be more important to consider. Either way, a financial professional can help you focus on what’s most important and make sound long-term decisions.

Ready to implement your retirement savings plan? Let’s talk about it. Contact us at Peak Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

 

1http://news.gallup.com/poll/210890/americans-financial-anxieties-ease-2017.aspx

2https://www.cnbc.com/2017/04/07/how-much-the-average-family-has-saved-for-retirement-at-every-age.html

3https://www.cbsnews.com/news/irs-allows-higher-retirement-savings-account-limits-in-2018/

 

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