One of the greatest concerns among Americans, and citizens in other post-industrialized nations, is financial security. Financial security doesn’t just apply to those years when you are actively engaged in the workforce, but also how you save for and survive during your retirement. There is a fixed window of time in life during which you can save for retirement, and there are some new and interesting ways to think about securing your savings.
Seek Out Unbiased Advice
If everyone understood stocks, bonds, and retirement accounts, there would be no need for financial planners and advisors. The key to using one of these individuals is to work with someone who offers unbiased advice. Investment brokers have a vested interest in the performance of your savings. If you work with these individuals, they are more likely to point you toward high-risk funds because they are paid commission based upon the performance of those funds.
This approach can lead to smaller gains or even losses for your savings. Trust a financial advisor who is paid a flat fee for managing your accounts. There’s no incentive to increase your risk, making it easier to secure sustained growth for the future.
Familiarize Yourself with the Rules of Withdrawal
Different savings accounts have different rules on withdrawals. For example, withdrawing from traditional IRA accounts before 59 ½ means paying a 10% income penalty on those funds. On top of that, it is a good idea to consider market conditions when you are deciding which account to withdraw from in the future.
While your Roth IRA funds withdraw tax-free, if the current market climate is low on taxes, it might be better to withdraw from your traditional IRA instead and pay those lower income taxes. This allows your Roth IRA funds to continue growing, and you can pull them out later, tax-free, if the market changes and income taxes increase.
Either way, make sure you know when to withdraw and from which account. Your money will last longer this way and sustain your lifestyle comfortably during retirement.
Expect to Live Longer
Americans are now living longer than at any point in the nation’s history. While this is good news, it also poses a difficult problem for those approaching retirement. As you prepare to live longer courtesy of medical advancements, will your savings be there to cover you for those extra years? Consider using some of your retirement savings to purchase an annuity to create a simple, yet efficient stream of income payments that are guaranteed for the rest of your life (or your spouse’s life).
Invest in Private Retirement Funds
Those individuals working for federal, state, and municipal government agencies or other industries with employer-funded pensions don’t often worry about retirement money in the future. Social Security was created to cover all Americans paying into the system. However, don’t short change yourself by relying solely on these.
America’s Social Security system faces shortages in the future, with some estimating it will only be able to provide 80% of the amount it does today by the 2050s. Lower your expenses and direct your extra money to private retirement accounts to double-down against the possibility of other accounts not living up to expectations in the future.
Securing your savings is a difficult task, but in order to enjoy a comfortable retirement, it is something you will have to focus on.