Seven retirement tips – Retirement advice for everyone

This article may not reflect current information about retirement accounts or the Minimum Distribution Age due to the recently passed SECURE Act 2.0 law. Find out the key provisions of this legislation and contact your Ameriprise financial adviser with any questions.

Planning for retirement isn’t just for the elderly. These seven essential retirement tips can help you plan now, regardless of your age or stage in retirement.

This is how it looks: You are not working

Without knowing where you are going, you can’t plan your retirement. Start thinking about your retirement life and what your plans are for the future. You will still need to finish working. You may want to start your own business. Do you have the desire to travel, volunteer, or be a professional grandparent? Perhaps you will build a cabin on the lake.

It is impossible to start planning for your retirement or get advice about retirement too soon. Even though your retirement goals may change over time, it is important to start planning now.

Save a lot by starting to prepare for retirement earlier

Once you have a clear idea of what you want to do, you can calculate how much it will cost. Use the Retirement Planner at ameriprise.com to run some numbers. Let’s assume you are 35 years old and earn $100,000 per year. You also have $200,000 in your retirement plan. It is possible that you will need to have $2 million saved by the age of 65. You’d need $550 per month to reach that goal and earn a 7% annual return.

Every opportunity to save money

As people live longer and their retirement costs rise, it’s possible that you will need more money in retirement. Save as much money as possible during your working years. Employees under 50 can save up to $19,000 annually through a workplace-sponsored 401K plan. For those over 50, there is an additional $6,000 catch-up contribution. Your employer might also offer a match.

Save at least 15% of your gross salary. Are you not there yet? Before you become too comfortable with a higher salary, increase your retirement savings contributions.

IRAs go beyond the workplace

You can also save tax-savvy money for retirement. You might consider opening a Roth IRA. This allows you to save after taxes and take tax-free withdrawals if certain conditions are met. This will help you to protect yourself against future tax increases and allow you to relax about taxes in retirement.

Another option is a traditional IRA. This can allow you to expand your retirement savings plan while giving you greater control over your investment choices. IRAs give you access to investment options that you may not have at work such as commodities, real estate investments, and emerging market funds.

Save strategically and use your assets wisely

Market swings shouldn’t throw your portfolio out the window. It can be very powerful to increase your retirement savings by determining how to best allocate your investments among various types of assets, including stocks and bonds. You can reduce the impact of market volatility by spreading your investments over different asset types and sectors.

Dollar-cost averaging, which involves investing a fixed amount on a regular basis regardless of market conditions, can also be helpful. Rebalancing your portfolio may allow you to reduce your exposure to investments that are outperforming the market and increase your exposure to others that could be ready to grow. These strategies can be complicated, so ask your advisor for advice.

Avoid emotional investing

Our emotions are influenced by market cycles. We tend to feel euphoric when markets are performing well and invest more money in stocks. If markets fall, emotions can change. This can lead to us pulling out of stocks just as the market reaches its lowest point and missing out on any potential gains when it rises again. This lesson teaches us that emotions can lead to us doing the opposite of what we should.

Insurance can help you reduce your worries

Unexpected events could happen, even if your investment strategy is smart. An illness could prevent you from earning an income and working. Your home may be destroyed by a storm. Protect yourself from the dangers of today’s world. Your advisor will help you evaluate your situation and recommend the best level of protection. You can enjoy the fun of planning for the future with sufficient coverage without worrying about the “what-ifs”.

Include details about your dreams and goals

Plan for your dreams, and start planning. Perhaps you have decided that your retirement years will be spent volunteering, traveling, or being a grandparent. Talk to your advisor about what this will look like. You are now closer to retirement. Now you can think strategically to make your retirement dreams and goals a reality.

If you are behind, catch up

As you approach retirement, saving as much money as possible should be your top priority. Maximize your contributions to retirement accounts. This includes making any “catch-up” contributions to your 401 (k) or IRA. You may be eligible to save extra 401k catch-up money if you are between 50 and 64 to help you reach your retirement goals.

Consolidating retirement accounts is an option

You might have one, two, five, or 10 retirement accounts. It can be difficult to manage multiple accounts and invest correctly. Consolidating your accounts before retiring can help you tap your money more efficiently and effectively. Discuss your options with your advisor and begin to plan how you will tap your accounts in retirement.

Take care of your health

Are you concerned about health care costs today? Wait until retirement. With both men and women having the same median prescription drug costs in 2020, a 65-year-old man would need $130,000 to save, while a woman 65 years old would need $146,000 to have a 90% chance of covering her health care expenses in retirement. 1 This number will only rise. Medicare covers only a small portion of these costs and may not cover all. Discuss with your advisor how you will cover healthcare-related costs in retirement. Also, consider funding a savings account for health. You can set one up if you have individual health insurance, or your employer will offer it. Contributions to an HSA by you or your employer don’t usually count as taxable income. Withdrawals are not taxed so long as they are used for eligible medical expenses.

Plan for retirement income now

Ask your advisor to discuss the income that you will need over 30-plus years, and whether it is worth starting planning now. You might consider adjusting your investments or getting an annuity to provide a steady income stream for your entire life.

Don’t ignore long-term care

According to the Department of Health and Human Services, 70% of Americans over 65 will require long-term care at one point or another. It is better to lock down premiums when you are younger.