The value of retirement savings is linked to what happens in the financial markets and the way they are reacting at present probably doesn’t make you feel very confident if you’re retired or planning to retire soon.
Experts caution that making any dramatic moves in a low market is the worst thing you can do. Impulsive reactions can leave you with savings that fall far short of your needs. Instead, it may be helpful to look at other strategies outside your investment portfolio to help extend how long your assets last.
1. Evaluate the income you’ll need for retirement
Estimating how much you will need for every year of retirement will help you decide how much of a nest egg you’ll need. If you retire at 65, you should have a financial plan for 20 years that addresses how you will cover your daily expenses during that period.
Setting up a budget for retirement can help you to avoid overspending, depleting your savings or falling into debt in the preceding years.
2. Understand what risks you’re willing to take
When investing in the long term, there are many ways you can allocate your funds, some of which have more risk than others. For example, stocks have higher risks and higher potential returns. You can align your portfolio with the level of risk you’re prepared to take.
For example, you might consider a 1% allocation to Bitcoin enough to give you the benefit of diversifying your portfolio without exposing you to too much risk.
Of course, you have to approach any investment in Bitcoin with a long-term mentality and be prepared to ride out volatile times. You can use Bitcoin ATMs to buy and sell Bitcoin. Bank of America has many Bitcoin ATMs in different locations, such as a Columbus Bitcoin ATM.
3. Consider how soon you want to retire
When you’re young, you can consider making some higher or medium-risk investments. For instance, if you invest in stocks and the markets take a downturn, you still have years before you need the funds and they have time to recover. Once you’re in your fifties, it is better to shift your money into lower-risk investments.
The longer you continue working, the less money you will need to save for retirement. Consider working for as long as you can do so and you will keep earning an income, shortening the time on which you will have to rely on your investments.
4. Have an emergency fund
You don’t want to dip into long-term savings to cover unexpected expenses, like medical costs or home repairs. Keeping some emergency funds, you can easily access helps you to avoid this.
The last thing you want is to pay huge penalties for dipping into retirement accounts early. In addition to paying fees for early withdrawal, the amount you take out doesn’t have the opportunity to earn interest and grow in the coming years.
5. Plan for taxes
Tax surprises could cut into your savings so it’s important to know what to expect. The way you invest can impact not only your current tax returns but future ones as well.
For instance, if you put money into a traditional IRA, you can deduct the contributions from your current tax return but you will pay taxes on withdrawal of the money in retirement. With a Roth IRA, you pay taxes on the amount you contribute to the account but you don’t have to pay taxes on it when you take it out in retirement.