Thinking about smart retirement planning puts some people in a panic. If you feel overwhelmed by all of the terminologies or are concerned about losing your nest egg on dodgy investments, you’re not alone.
Just breathe. It’s actually easier than you think to create a plan for growing your assets in a safe and healthy way. A talented and experienced financial advisor can help you examine your golden years’ goals and come up with a road map that will guide you to a comfortable retirement with minimal risk.
Here’s a sneak peek into the most prudent investment strategies you can adopt right now.
Saving is tough – but we can help!
Most experts recommend that you aim to save 10-15% of your gross monthly income towards your retirement fund. But sometimes it might seem like you just can’t save any harder, especially in times like these. If this is the case, please feel free to reach out for a conversation with one of our skilled and compassionate experts.
Similar to the 4% rule, the $1,000-a-month rule of thumb states that for every thousand dollars you want in retirement income, you’ll need to save $240,000. This assumes a 5% annual withdrawal rate after you retire.
What’s the best way to trim your budget a little bit now so you can have more fun money for later in life? Along with the obvious things like saving your restaurant visits for special occasions, you can also cut back on superfluous spending by making a few barely noticeable changes, such as:
- Using cash instead of credit cards
- Utilizing discounts via mobile apps and rewards programs
- Mapping out major purchases in advance
- Resisting the temptation of excessive online shopping
- Going green to lower your utility bills
- Opening a high-yield savings account
You don’t have to scrimp and live a miserable existence now to have enough for when you retire — you can still enjoy the good things in life now and then by adopting smarter spending habits.
Elevate your 401(k)
If you have an employer-sponsored 401(k), it’s essential that you receive the maximum value from this account by directing your main savings dollars here. If your company offers matching funds, you’ll want to contribute at least that amount.
Many people don’t look closely enough at the fine print when setting up this process with their jobs, or the sign-up is automatically part of the new hire onboarding process. The usual 3% automatic deduction might not be enough to support the kind of lifestyle you want for your retirement. Ideally, you’d want to boost that to 10%, if you’re able to do that now; if not, you can increase the withdrawal by 1% each time you receive a raise in pay.
Strengthen your IRA
An IRA, or Individual Retirement Account, is a tax-advantaged savings account that grows your assets through long-term investments. There are stiff penalties for withdrawing money early from these accounts — but as with anything tax-related, there are always exceptions to the rule.
You can open an IRA even if you already have a 401(k), although the tax deductibility of your contributions may change. There are several different types of IRAs and a nearly endless choice of investment strategies. If you need to open an IRA, a certified financial planner can help you select one that will increase your savings while keeping the investment risk low.
If you’re interested in using new tech to make easy investments in the stock market, then you’ll want to do some research into the value of defensive stocks. These provide consistent dividends and low volatility. Well-established businesses with steady cash flow make reliable targets for this kind of investing.
Some examples of defensive stocks include:
- Utility companies
- Foods and beverages
- Consumer staples
- Home improvement
These kinds of stocks typically outperform others in the S&P 500 by as much as 15% during periods of economic uncertainty, and can also act as a hedge against inflation. Additionally, “dividend aristocrats” are stocks that have paid profits to shareholders for at least 25 consecutive years running.
Trust in real estate
Mark Twain once said, “buy land, they’re not making it anymore.” A real estate investment trust (REIT) will let you reap the benefits of investing in income-producing properties without all the hassle and work of actually being a landlord.
REITs are an excellent way to diversify your portfolio, and they’re historically one of the top-producing asset classes. These trusts are usually focused on a specific kind of property, such as retail, residential, healthcare, or office spaces.
There are many publicly traded real estate investment trusts which are generally a safer investment option for retirement funds than a private REIT.
Buy an annuity or securities
An annuity is a super low-risk financial product issued by insurance companies that lets you earn interest on a tax-deferred basis. They provide guaranteed income for the rest of your life after you reach a certain age.
Purchasing an annuity gives you a rock-solid framework for your retirement plans and it’s an extremely safe investment, especially as part of a larger portfolio.
U.S. Treasury bonds are a form of fixed-income securities backed by the federal government. They are available with varying lengths of maturation, from weeks to 30 years. The Treasury also offers inflation-protected securities, also known as TIPs, but they can significantly underperform when compared to other bonds.
Stay focused on your goals
The smartest investment strategy of all is to keep your eye on the prize — a lengthy and healthy retirement with plenty of funds for everything you need. Partnering with a skilled wealth advisor can give you a distinct edge when it comes to making the right decisions for your future.
From mitigating risk to growing your income with tax-efficient investments, we can help you develop a winning plan for securing and growing your assets and enjoying a carefree retirement. Every journey begins with the first step. Reach out today!