Cypress Wealth Services
Even if you’ve saved diligently and have ample amounts of assets in your retirement accounts, there’s always that lingering fear that you won’t have enough money to live out your ideal retirement. Between rising inflation, global uncertainty, and market volatility, it’s difficult to have complete confidence in your financial future.
Thankfully, even as the clock winds down on your working years, it’s not too late to bulk up your nest egg and give yourself more of a cushion. With patience, discipline, and the right guidance, you’ll be on your way to a secure retirement. Here are 5 steps you can take today to catch up for retirement in a hurry.
The most obvious thing you can do is save more. Cut back on expenses, channel a healthy percentage of any raises and bonuses directly to savings, and automate savings increases of 1% of your paycheck every few months. It may not seem like you are making much of an impact, but every dollar helps.
Your increased savings can be invested in your company 401(k) or 403(b) plan or your personal IRA. If you are over 50, you (and your spouse, even if only you work) can invest an extra $1,000 per year into an IRA for a total of $7,000 for 2021 and 2022.(*1) The catch-up contribution for those over 50 is even greater for 401(k) and 403(b) plans at $6,500, for a total contribution limit of $26,000 ($27,000 for 2022).(*2) If you’ve managed to max out your IRA and workplace retirement plan and still aren’t saving enough, you can open a taxable brokerage account for your additional savings.
Your goal retirement date doesn’t have to dictate your investment time horizon. You may be planning to retire in 10 years, but you don’t need to set a 10-year horizon for your investments because you’ll only need a small portion of your nest egg in the early years. The rest of your money may stay invested for another 20 to 40 years. Make sure you invest with the right perspective so you can work toward as much growth as possible.
One thing to remember, though, is not to try to chase unreasonable returns. With the proper asset allocation, you can diversify your portfolio among different asset classes which seek to balance risk with reward. Taking on excessive risk in an effort to boost your funds isn’t worth the possibility of losing half your money when the next market correction strikes.
Insurance is one of those financial products that most people purchase and then promptly forget about. It would be worthwhile to review all of your insurance policies to ensure that you actually need the coverage you have. Your needs may have changed dramatically since you had a young family, and there is no point in paying for something you no longer need.
Also, you should make sure that you have a long-term care plan in place, either with insurance, a life insurance rider, or a contingency fund once you are over age 60. Nothing drains a nest egg faster than paying out of pocket for a high level of care. Since nearly 70% of today’s 65-year-olds are going to need some form of LTC,(*3) it’s important to consider how long-term care will affect your overall retirement plan.
The less debt you have when you enter retirement, the better. Reducing your consumer debt before retiring helps you lower your monthly expenses and enables your savings to grow and last longer.
Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first. Once you’ve eliminated credit card and auto debt, see how you can aggressively pay off your mortgage. Not having a mortgage could reduce your monthly expenses by up to a third and make a significant impact on how you spend your savings.
There are several benefits to delaying retirement to work a few more years, or to work part-time during retirement. The biggest reason is that you have more time to earn an income and save. And every additional year that you work is one less year that you will be depending on savings and draining your nest egg.
Working longer will also allow you to delay claiming Social Security. While Social Security benefits can be claimed as early as age 62, the longer you wait to file, the greater the benefit you will receive. If you file at age 62, you will only receive 75% of your earned benefit, but waiting until age 70 allows you to receive 132% of your earned benefit.(*4) This can make a substantial difference in your retirement income for the rest of your life. Even if you don’t require Social Security payments to live on during retirement, the benefits can be invested or gifted to your heirs. That’s why it’s vital to plan ahead to maximize your total lifetime benefit and aim to use the asset as part of your overall financial plan.
There are a number of options for boosting your retirement savings, but investing, insurance, and Social Security rules can be complicated and confusing. This is why it’s important to consider turning to an experienced financial professional to guide you as you work to make the most of your money.
At Cypress Wealth Services, we help you prepare for every aspect of retirement, including income and tax planning, healthcare decisions, estate planning, and overall risk management. Our goal is to help you secure, maintain, and protect your financial lifestyle throughout your lifetime. If you would like to partner with us, call our office today at 866.888.6563.
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With financial advisors in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.