4 Tricks to Help You to Afford Retirement

Last updated: March 14, 2017

The prospect of affording retirement is becoming increasingly worrisome for the generations of today.  Over the past few years, the cost of living has increased, more adult children are moving back home, pension plans are declining, health care costs are increasing, and social security benefits are decreasing. These factors make for the foundation of a retirement crisis, but there are some things that you can do to help you to afford retirement when the time comes.

1. Diversify Retirement Accounts

When it comes to saving for retirement, make sure that you diversify your retirement accounts. If possible, split your salary deferrals between a tax-deferred account and a Roth account. Doing this will create a more flexible financial environment when it comes time to retire since it will provide one account with tax-deductible contributions (IRA’s and 401(k)’s) and one account with tax-free withdrawals (Roth). Just ensure that you familiarize yourself with the different guidelines of investing into each of these types of accounts as they differ quite drastically!

2. Diversify Investments

When investing funds for retirement, diversify your investments by following some of these tips:

  • When buying stocks, invest in various industries and various stocks rather than putting all of your eggs in one basket.
  • Invest in index funds to add more stability to your investment portfolio.
  • Don’t be too stubborn to withdraw your money when things aren’t looking good. Too many investors try to ride out peaks and valleys without knowledge of the market, stay on top of market news and know when to get out!
  • Consider investing in real estate.

3. Know What Your Money is Doing

Don’t just leave it to your investment funds manager, know what your money is doing and don’t be afraid to advocate for your savings! Too many people trust their retirement savings to a financial advisor and don’t follow the progress of their investments. Not all financial advisors are good at what they do and not all of them are going to be honest with your money. If you suspect that your financial advisor is not making your money work for you or they are not making your money work hard enough, speak up or pull out!

4. Use Your Savings Account

Not all funds for retirement should be invested, you always need to have a cushion of cash on hand. Use your savings account and set up automatic deposits from your checking account every month to create a readily accessible next egg. A good number to keep in mind is 10%, every month try to set aside 10% of your net income in your savings account while earmarking another 10% for debt payoff or portfolio investments. Just make sure to keep in mind how much the FDAC will insure for your savings account and don’t exceed that amount. The standard insurance amount for personal savings account by the FDAC is $250,000, if you exceed this, set up a second savings account at a second banking institution for FDAC protection.