5 Strategies for Smart Retirement Savings

Moneymagpie Team 18th Sep 2023 No Comments

Reading Time: 3 minutes

You’re not alone if you think you’re not saving enough for retirement. Nearly 68% of Americans think they do not have enough savings to retire. Saving for retirement is indeed an overwhelming task, but you can make it manageable by using the right strategies. With a proper retirement plan, you can continue living a comfortable lifestyle and not have to rely on others for your daily expenditures. In this article, we will run you through some simple strategies to help ensure that your golden years stay genuinely golden.

Start Early, Save Consistently
Diversification As a Foundation
Role of Precious Metals
Plan for Healthcare Costs
Keep an Eye On Fees and Taxes

1. Start Early, Save Consistently

You should start saving for retirement in your 20s. The later you start, the harder it becomes to save a sufficient amount. Even a small but consistent amount can make a huge difference. An early start also allows you to benefit more from compound interest, which is the interest earned on both the initial principal and the accumulated interest in an investment or savings account over time.

2. Diversification As a Foundation

Diversification means that you shouldn’t concentrate all your resources in one place, since it puts you at risk of losing everything if external factors like inflation and geopolitical issues negatively impact your investment.

When you invest everything in a single commodity, your whole retirement savings go up and down with the value of that particular commodity. Including an appropriate number of suitable assets like bonds, real estate shares, and stocks in your retirement portfolio is imperative.

Each asset you invest in has a unique risk profile and potential return. To truly benefit from diversification, it’s crucial to make a strategic and well-balanced mix of investments. You can also constantly change your investment portfolio by selling certain assets when their value readily appreciates and using the money to buy other forms of investment.

3. Role of Precious Metals

Precious metals have an unparalleled inherent value, especially beneficial in economic uncertainty. They are resistant to inflation and maintain a constant value worldwide. Precious metals, especially gold, negatively correlate with other assets like stocks and bonds. So, including precious metals in your retirement portfolio also helps in diversification.

There are many ways of including precious metals in your retirement portfolio, like physical ownership, buying shares in a mining company, or opening a precious metal IRA account. If you are physically purchasing precious metals in the form of coins, bars, or jewelry, you must keep them safe away from prying eyes. You can get a safety deposit box in a bank or save money by keeping it at home. To securely store precious metals like gold, you could head over to this website for more information: https://www.oxfordgoldgroup.com/articles/home-storage-gold-ira/

4. Plan for Healthcare Costs

Medical bills are one of the most significant expenses in retirement. They can pose a significant threat to your carefully calculated budget. That is why you should plan ahead to mitigate these healthcare expenses. One of the ways to do so is through a health savings account (HSA).

An HSA enables tax-free withdrawals for medical expenses, reducing budget strain. This tax advantage makes HSA a valuable tool for planning healthcare expenses in retirement. Usually, you can only use HSA funds for qualified medical expenses. Using it for other purposes incurs taxes on the withdrawn amount and a 20% penalty. However, for individuals over 65 years, there is no such limitation, and they can use HSA funds for any medical purpose.

5. Keep an Eye On Fees and Taxes

You must constantly monitor fees associated with retirement accounts and investment options because keeping the fee as low as possible is essential in maximizing the returns. Index funds and ETFs (exchange-traded funds) are good choices to minimize the fees because they passively track the market and have lower fees than actively managed funds.

Another way of maximizing returns is by paying less tax. An individual retirement account (IRA) is a savings account that offers tax advantages. There are two kinds of IRAs: traditional and Roth. Traditional IRAs provide tax-deductible contributions, while Roth IRAs give tax-free withdrawals after retirement. You can choose between the two by considering your current income level and expected income in retirement. Roth IRAs have a set limit you must transfer into the account. While traditional IRAs have no such limitation, they require you to withdraw a set amount after retiring.

Endnote

There is no universal answer to financial problems. You should always stay up to date and adjust your retirement strategy according to the changing market trends and tax laws. You can lay the foundation for a comfortable and secure retirement with the right approach and appropriate strategy.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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