For many who are 50-something, their shortfall in retirement savings is not completely caused by a lack of planning. Many of them lost much of their savings during the recent financial crash in 2008 and 2009. Then, they were forced to take on a higher risk-profile than they should to try to compensate for their losses, which failed as planned for many, further aggravating the set-back in savings. Investors who are nearly retiring might be tempted to increase the risks they take in order to make sudden gains; but overdoing it can be disastrous. There are other, less dangerous means of getting your retirement plans back on track even if you will within only 10 to 15 years. Let us look at some:
• If retiring at 65 is not practicable, think of postponing it a few years till you reach 68 or 70. This will provide you with additional time to accumulate extra funds and can help you attain your goal for retirement savings.
• Keep saving as much money as you can. Even if your time-horizon is much shorter, it is never too late to start saving what you can to provide some extra cash-flow for your retirement.
• Try reducing high-interest debt. Paying off credit-card loans and other debts will improve your cash-flow and, dollar for dollar, is preferable to keeping your cash in low-yielding savings accounts. Simply put, you gain more by paying off credit-card debt at 10% interest than earning only 1% interest in a savings account.
• Consider Annuities. Annuities are products meant to pay a set monthly payment for certain duration and may work well for somebody lagging on their retirement savings. Because annuities are often insurance products, they may come with high rates and commissions. Speak with a trustworthy fee-only financial planner before acquiring an annuity. They can assist you in searching out low-fee options that will suit your personal retirement needs.
• Optimize your investment portfolio. Although you should remain essentially conservative, you should make sure that you possess the right combination of assets to produce the greatest possible profit for the amount of risk taken. Referred to as the “efficient frontier”, this is an objective for all investors which could come into clear view with a few short years to retirement. Tweaking your asset distribution could produce significantly better portfolio appreciation without taking on more risks. When assessing your allocation of assets, be aware of company stock you may have. Company stock should not comprise more than 10% of your portfolio in order to remain diversified and to avoid being overburdened by one stock. Employees who have served in a company for quite a while may possess far more than 10% in stock options as part of their retirement and might be better served by a more diversified portfolio. Be wary of high-fund fees. If you have mutual funds, make sure you pay competitive fees of not more than 1%. Remember, with low-fee fund options provided by Vanguard and others, you can readily find funds averaging about 0.5% for fees.
Source: Hong Kuang Commodities