Here are 10 practical ways to ramp up your retirement investments as you plan for your future.
In this article:
- Regular Review of Retirement Goals and Current Retirement Position
- Optimized Retirement-Related Contributions
- Re-Distribution of Investments
- Alternative Investments
- Longevity Annuity
- Consolidated IRA
- A Lower-Maintenance Home
- Small Reductions in Expenses
- Debt Retirement
- Take Care of Your Health
Ramp Up Your Retirement Investments With These 10 Ways
1. Regular Review of Retirement Goals and Current Retirement Position
Regularly reviewing your retirement goals against your current retirement financial position will allow you to see whether or not you’re on track towards accomplishing your retirement financial goals.
If you find that you’re not on track, this can help you figure out how far off you are from your goals. Then you can act accordingly, get back on track, and ramp up your retirement investments.
2. Optimized Retirement-Related Contributions
Did you know that, after turning 50 years old, you can make annual catch-up contributions of up to $6,000 more in your 401(k) and $1,000 more in your IRA? This means you can put in $7,000 more every year into your tax-favorable retirement savings.
When your spouse turns 50 years old, you can ramp it up even more. If they do the same, both of you can contribute $14,000 more every year in your retirement fund.
3. Re-Distribution of Investments
As they age, many investors who are preparing for their retirement choose to shift more of their investments to lower-risk assets. Doing so helps minimize risks for large investment losses and optimizes the chances of locking in on much of the investment gains of their retirement funds.
The American Association of Individual Investors (AAII) recommends a retirement investment portfolio of 30% (maximum) in cash and its equivalent and 40% (minimum) in stocks and bonds. If you followed this guideline, that would allow for up to 30% in alternative investments such as cryptocurrencies and real estate, among others.
Why this portfolio mix?
A conservative portfolio is vulnerable to the effects of inflation while an aggressive portfolio is highly vulnerable to unfavorable economic events. For a retiree or a person who is close to retirement age, recovering from huge losses can be very difficult.
Conservative Portfolio Definition: An investment portfolio consisting mostly of financial assets that have low financial risks. Examples of such assets are cash, securities issued and guaranteed by the Federal Government, high-quality debt securities, and precious metals.
Aggressive Portfolio Definition: An investment portfolio consisting mostly of high-risk financial assets such as shares of stocks, mutual funds, foreign currencies, and cryptocurrencies, among others.
4. Alternative Investments
For alternative investments in your retirement fund portfolio, assets like precious metals can help you ramp up your retirement investments through the following benefits, according to prominent precious metals dealer Birch Gold Group:
- Portfolio Diversification – When you invest in precious metals like gold and silver, you can minimize your portfolio’s market risk.
- Inflationary Hedge – Precious metals can help you maintain your wealth even when the U.S. dollar continues to decline. Even better, the price of precious metals – particularly gold – can benefit from the Federal Reserve’s policy changes.
- Less Volatility – As retirement approaches, shifting more of your IRA investments to financial assets that are less volatile – such as precious metals – can benefit you. Doing so can help you optimize your chances of locking in on the gains you’ve already realized through your IRA investments.
- High Growth Potential – Precious metals like gold, silver and platinum are finite resources, and their limited supply and high demand gives precious metals a growth potential that’s unlike other financial assets. These characteristics help provide more security and higher growth potential compared to most other financial assets, which can help ramp up your retirement portfolio even more.
Diversification Definition: Dividing your investible funds into several different financial assets to reduce your financial risks.
Hedge Definition: A financial asset that can help offset potential losses from other financial assets. An example is auto insurance, i.e., which offsets the financial loss from damages to a vehicle by paying the owner a sum of money needed to repair or replace the damaged vehicle.
If you want to get a good idea of what it takes to successfully invest in precious metals such as gold, here’s a good article that can help.
5. Longevity Annuity
You need a comfortable nest egg and income to really enjoy and make the most of your retirement. This can help you meet your medical needs at old age.
Getting a deferred-income or longevity annuity may be able to help you meet such needs during the latter part of your extended retirement. Through a longevity annuity, you can get a regular stream of income that can help fund your extended retirement.
Annuity Definition: A specific amount of money paid to a person on a periodic basis, e.g., monthly, quarterly. This amount is typically paid throughout the remainder of a person’s life.
A longevity annuity is a financial contract between you and an insurance company. You pay regular premiums, and the insurance company will provide a guaranteed lifetime income stream later on in your retirement under this contract.
Compared to regular annuities (immediate annuities) that pay out money immediately upon retirement, this type of annuity typically starts paying money 15 to 20 years after. This type of annuity may help you ramp up your retirement investments starting this year by serving as a backup to your IRA and 401(k) in old age.
The online financial publication, Money, recommends allocating around 10% of your IRA fund in a deferred-income or longevity annuity. For security, Money magazine recommends getting a longevity annuity only from top-rated insurance companies, e.g., rated at least AA by Standard & Poor’s.
6. Consolidated IRA
Consolidating your IRAs under one institution can also help you consistently and accurately monitor your entire portfolio. With only one IRA to monitor, you minimize the risks of forgetting to monitor your account and not taking timely and appropriate action on your IRA portfolio.
You can enjoy it even more by delegating management of your IRA to a trustee or a trusted family member. And by consolidating your IRAs under one financial institution, your designated family member or trustee will have a much easier time managing your IRA for you.
7. A Lower-Maintenance Home
One thing you can do to ensure a satisfying and minimal-stress retirement is to minimize your home-maintenance expenses. You can do this by downsizing to a less-costly home before you retire.
According to Gary Klaben of Coyle Financial Counsel in an interview at Kiplinger.com, you can accumulate more wealth for retirement if you choose to downsize as soon as possible. And if you decide to increase your retirement finances by moving to a lower-cost home, Klaben says that you have to consider all costs associated with selling your current home and moving into a new one before doing it.
8. Small Reductions in Expenses
The ability to minimize expenses is also important when it comes to achieving retirement goals. It can help you optimize the money you regularly put aside in your IRA, 401(k), or other retirement funds.
When it comes to successfully reducing your expenses, going small is better than going big. Compared to reducing expenses by big amounts, it’s more practical and sustainable to do so in small amounts.
Over time, small reductions in expenses can accumulate into substantial amounts that can make a difference in your financial preparations for retirement. Some very practical and sustainable examples of reducing expenses in small ways include:
- Bringing down the temperature of your water heater by even one notch
- Turning up the air conditioning unit’s thermostat by just 1 or 2 degrees
- Bringing home-packed meals to work instead of eating out during lunch
- Opting for Netflix instead of watching movies at the theater and paying for cable TV
- Commuting to and from work instead of driving your car every day
9. Debt Retirement
When you pay off your debts as soon as possible, you’ll be able to save more money. This is because you won’t have to pay any more interest and charges.
And when you get to save more money, you can have more investible funds for your IRA and 401(k). With more investible funds, your potential retirement income from investments may increase too.
Also, allowing personal debts to linger will cost you more money in terms of interests, penalties, and charges. If your debts are past due, your creditors will compound these unpaid costs, substantially growing them over time.
Compounding Definition: Adding unpaid interest and charges to the original amount owed to creditors. This results in bigger debt and higher interest and charges in the future.
10. Take Care of Your Health
As cliché as it may sound, health really is wealth. While being healthy doesn’t instantly mean more money, it can help you invest more money in your IRA or 401(k).
When you’re generally healthy, you get sick less often and you can minimize your risks for major health conditions. That means you can minimize your health-related expenses and invest the money you save into your retirement portfolio.
When you’re generally healthy, you can also minimize the days in which you can’t work due to illness. Minimal downtime at work can translate into optimal personal productivity and potentially higher income and investible funds for retirement.
Each year brings you one step closer to retirement, increasing the importance and urgency of your retirement finances. Taking practical steps such as these can help you ramp up your retirement finances and meet your retirement needs.
So, which of these 10 practical ways to ramp up your retirement investments can you start doing now? Which of these 10 do you think is the most challenging to do? Share your thoughts with us in the comments section below.
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