Tips to Jump-start Your Savings
It’s graduation season. Do you have a graduate who is finishing up on college? If so, this is a time to celebrate your child’s accomplishment and their entrance into adulthood.
It also may be a time to celebrate your new freedom. You have one less dependent in the house and one less tuition bill to pay. You might see a healthy boost in your bank account and budget in the near future, especially if you’re now an empty-nester.
Before you start spending all that extra cash, this could be a good time to review your retirement strategy. If you’re behind on your savings, you’re not alone. Many people wait until after their kids graduate and leave the home before they get serious about saving for retirement.
The good news is there’s still time to get back on track. Below are three steps you can take today to boost your savings and take back control of your retirement strategy. If you’ve waited until your kids were grown to get serious about retirement, now is the time to take action.
Use a budget.
Do you use a budget? If the answer is no, you have company. According to a recent survey, 60% of Americans don’t use one. ¹ That’s an unfortunate statistic because a budget is one of the most powerful financial tools at your disposal.
A budget is especially important if you now have a boost in cash flow because you’re no longer supporting a child or making tuition payments. You can use your budget to plan and analyze your spending so that additional cash flow goes toward retirement instead of unnecessary purchases.
There are a variety of online tools you can use to create your budget. A spreadsheet can also be effective. The key is to set spending goals for each type of purchase and then regularly review your budget to make sure you hit your targets.
Boost your contributions.
The most effective way to boost your retirement assets is to simply contribute more money to your retirement accounts each year. Once you turn 50, you have an opportunity to increase your savings rate through something called “catch-up contributions.” A catch-up contribution is simply an extra allowable contribution amount for those approaching retirement.
In 2019, you can make a regular contribution of up to $19,000 to a 401(k). However, if you are 50 or older, you can contribute an additional $6,000, giving you a total allowable amount of $25,000. You can contribute up to $6,000 to an IRA, plus an additional $1,000 if you are 50 or older. ² Catch-up contributions can help you boost your savings and get your retirement back on track.
Guarantee* your assets and income.
As you approach retirement, you may find that you have less tolerance for risk. That’s natural. After all, you don’t have as much time as you once did to recover from a substantial market loss. Of course, you also need to keep growing your assets, so you can’t avoid risk completely.
How do you balance your need for growth with your aversion to risk? One way to do it is with an annuity. Many annuities offer growth opportunities with downside guarantees*. For instance, a fixed indexed annuity allows you to earn interest that is linked to a market index. If the index performs well, you may earn more interest. If it performs poorly, your principal is protected.
Fixed annuities also offer ways to create guaranteed* lifetime income streams. You can convert a portion of your assets into a cash flow that will last for live, no matter how long you live. That could provide some certainty and predictability as you head into retirement.
Ready to get your retirement on track?
Let’s talk about it. Contact us today at Grand Canyon Planning Associates. We can help you analyze your needs and goals and implement a strategy. Let’s connect soon and start the conversation.