No matter what your age, day by day and minute by minute you are moving closer and closer to retirement.
For some people, the idea of retirement seems so far off in the future they tend to dismiss it. For others, it’s just around the corner.
But if you have been thinking about your retirement lately and it scares you even a little, here’s how you can avoid the fear of retirement.
Hire a Financial Planner
One way to help ease the fear of retirement, no matter how close or far from it you are, would be to hire a financial planner. Make sure it is someone you are comfortable with and then get started formulating a plan for your retirement that works for you and any family you may have. When you meet you will likely evaluate your current finances, make goals for your retirement, and formulate a plan for how to get there.
The Labor Department recently announced new rules for retirement planning advice that could save investors a lot of money. Put simply, the new rules require brokers and advisers to put their clients’ interests first when offering retirement planning advice. While it seems as if this is something that the brokers and investment advisers should already be doing, these rules are designed to make sure that all advisers are in compliance. Financial firms would have until January 2018 to get into compliance.
New Standards Under The Rules
The new rules create a new standard for brokers and advisers that is stricter than current regulations. Currently, brokers are categorized as registered representatives and are only required to recommend “suitable” investments based on an investor’s personal situation. After the implementation of the new rules, a broker that is handling retirement investments must act exclusively in your best interest, even if it would cost the broker some potential income. Investment advisers, who generally must register with the Securities and Exchange Commission or a state securities regulator, are already charged with putting their customers’ interests first under a fiduciary standard, regardless of what accounts they work with.
The rules from the Labor Department are intended to guard retirement investors from poor or conflicted investment advice. According to an estimate from the White House Council of Economic Advisers, conflicted investment advice costs these savers roughly $17 billion a year. The implementation of the rule should reduce the number of retirement savers being steered into complicated and pricey investments, leaving them with more money in their accounts.
The rules are also supposed to improve disclosures about conflicts of interest. In many cases, a firm is paid by a mutual fund company or other third party for recommending a particular investment. While the new rule won’t ban commissions, brokers may have to explain why they are recommending a particular product when a less expensive option is available. Some firms may decide to move investors from commission-based accounts to fee-based accounts, where what brokers and advisers are paid would not depend on the type of investment product they sell.
What Industry Insiders Say About The New Rules
Critics have voiced concerns that the new rules would not go far enough to properly protect investors. The final rules clarifies that there is no bias against selling proprietary products. It also has no specific language regarding the need to disclose the amount of fees and other charges being paid. These issues have been responsible for many of the problems and abuses seen in litigation and arbitration against brokerage firms over the years.
However, many proponents of the rule change said they believe the final rule is balanced on the whole, including the Financial Planning Coalition and the Consumer Federal of America. Regulators are requiring firms that only sell proprietary products to fully disclose that they are offering a restricted menu of products and they must offer a best-interests contract to customers. All new money being invested must be in the best interest of the client and any new retirement planning advice for money already invested must be as well. If advisers do not adhere to the standards, retirement investors would have greater recourse to recover their money.
Saving for retirement is a very important part of financial planning. Having a goal for your retirement savings can keep you on the right track, but meeting those goals can be difficult. A recent survey conducted by Capital One Bank found that only a third of respondents accomplished their financial goals last year. This year, you can improve your performance by following these simple retirement savings tips that boost your retirement account balances.
Automate Your Retirement Account Deposits
One of the best ways to boost your retirement savings is to automate your deposits into you retirement accounts. This allows you to save continuously without exerting any effort, making it more likely that you will reach your savings goals. Your employer does this for you with 401k accounts and other workplace based retirement plans by taking the deposits directly out of your paycheck. With IRAs and other retirement accounts, you can set up a direct transfer from your bank account through your bank’s online features.
Take Advantage Of Free Money
If your employer offers matching contributions for a 401k account or other workplace-based retirement plan, take advantage of the free money to boost your retirement savings. The matching funds are desposited directly into your retirement account where it can grow until it is needed. Many employers offer a percentage of wages as matching funds, so be sure to contribute enough to get the entire match amount.
Aim For The Maximum Contribution
The IRS has instituted maximum contribution amounts for retirement accounts to prevent abuse of the system. The maximum contribution amounts for 2016 are $18,000 for 401(k), 403(b), and most 457 plans for account holders age 49 and under. Those age 50 and over can contribute an additional $6,000 for the calendar year. For traditional and ROTH IRAs, the contribution limit for 2016 is $5,500. Those age 50 and older can contribute an additional $1,000.
Don’t Tap Your Retirement Savings
If you want your retirement account balances to grow into the amount you need for a secure retirement, you must refrain from tapping into the funds. Some people treat their retirement accounts like emergency accounts and withdraw money when they have a big unfunded expense. Taking out the money prevents you from taking advantage of the compound interest vital to growing a retirement account balance quickly. Set up a separate emergency account with at least $3,000 to use in the event of an unexpected expense.
A majority of Americans are afraid that they won’t have enough money saved for retirement to live comfortably. According to a recent report from the Transamerica Center for Retirement Studies, nearly half of current retirees say they waited too long to begin saving for retirement and 61 percent of respondents expect Social Security to be their primary source of retirement income. Fortunately, it is never too late to boost retirement savings. Here are some tips that can help you reach your retirement savings goals.
Start Saving More Now
The sooner you start saving more for retirement, the bigger the benefits will be. If you have not yet started saving for retirement, start with $100 and go from there. Every dollar that you are able to sock away will grow through interest until the money is withdrawn in retirement. Thanks to the power of compound interest, small contributions can grow to big balances over the years. Start saving whatever you can today.
Take Advantage Of 401(k) Benefits
A traditional employer-based 401(k) plan allows you to contribute pre-tax money to boost retirement savings, which can be a significant advantage. These plans let you can invest more of your income without feeling it as much in your monthly budget since that money comes out of your paycheck before taxes are assessed. Many employers also offer matching contributions for the accounts, essentially giving you free money to save for retirement. Make sure you contribute enough to get the full employer match.
Boost Retirement Savings Further With An IRA
Saving money in an individual retirement account (IRA) is another good way to build your nest egg. Contributions to traditional IRAs may be tax-deductible and the investment earnings have the opportunity to grow tax-deferred until you make withdrawals during retirement. There are several different types of IRA available, so do some research to determine which one is right for you before you open an account.
Automate Your Retirement Savings
Automating your retirement savings lets you save for retirement without having to think about it. Workplace based retirement plans makes this easy for you by deducting your retirement plan contributions from your paycheck each pay period. Banks and brokerages that hold retirement accounts often have ways for you to automate your contributions and investment selections through their websites. A set-it-and-forget-it plan is one of the best ways to ensure that you continue saving for retirement.