Paying Off Debt with Retirement Savings - Is it the Right Thing to Do?

 

Using retirement money to pay off debt is a very serious decision. Surely, in the long term, high-interest debt will be avoided if you pay off such debt. 

However, you must consider that doing this will sacrifice the potential for future investment gains inside your retirement account.

Furthermore, these early withdrawals may mean added taxes and penalties that can further decrease the amount you have available for use toward your debt and further deplete your retirement savings.

Pros and cons of using retirement savings to repay debt

Using retirement savings to pay off debt is one major decision that could have an impact on an individual's long-term financial future.

Here are some considerations to help make a decision as to whether it is a prudent move:

Pros of Using Retirement Savings to Pay Off Debt

Immediate Debt Relief
Paying off high-interest debt, like credit card debt, offers a chance to provide immediate financial relief by reducing overall interest payments.

Improved Cash Flow
Removing debt payments can alleviate cash flow each month, which could help make one's daily expenses more manageable and eliminate the stress of making those payments.

Possible Interest Savings
If the interest rate for that debt is considerably higher than what you are earning on your retirement savings, over time, you could save a lot just by paying off the debt.

Cons of Using Retirement Funds to Pay Off Debt

Tax Penalties and Fees
You'll have to pay taxes and early withdrawal penalties, such as for those younger than 59½ years, which grossly cuts down the amount available to pay the debt.

Lost Growth of Investments
Your retirement savings are invested to increase over time, compounded. If you withdraw money, you reduce the amount that has a chance to keep growing, which may hurt your long-term financial security.

Less Security in Your Retirement
Depleting retirement savings will undoubtedly compromise your future financial security since you cannot afford to retire comfortably or have to work longer.

Opportunity Costs
It is money that is paid out for debt service that will no longer be available to take advantage of any other investment opportunities with better return potential over time.

When is it good to pay off debt with retirement savings?

Generally speaking, using retirement money to pay off debt is a lousy idea; however, based on your financial condition, there may be a couple of scenarios in which it does make sense. Here are a few instances:

• If you're approaching retirement, the emotional and financial burdens from the debt alone are enormous.
• If your high-interest debt is growing faster than your retirement account,
• If you can quickly pay off the aggregate debt without it making a significant dent in your retirement account,
• In the long term, keeping retirement funds will benefit you more than you would achieve by relieving your debt burden immediately.

How to Avoid Using Retirement Funds

Debt Consolidation
Consider debt consolidation, which combines high-interest debts into a single payment plan with a lower interest rate, reducing monthly payments and interest costs.

Balance transfer
Only some credit cards offer introductory interest rates of 0% on debt-to-transfers. This way, one can at least be relieved from high-interest debt in the short term. 

However, to avoid excessively higher interest rates, it is very important that the remaining amount be paid off before the promotional period ends.

Adjustments to Budget
Go through your budget and make adjustments, finding areas where you can cut back on spending and then apply those savings toward debt repayment.

Credit Counseling
Look for credit counseling to help you find other ways of managing debt and come up with a plan that best fits your financial situation.

Increase Income
Find ways of increasing your income by picking up a side job or selling some stuff that is lying around but doesn't serve a useful purpose anymore. This would surely help pay off those debts quicker.

Negotiate with Creditors
Contact your creditors to see if there is an opportunity for a reduction in the interest rates or other terms of the debt.

Key Considerations

Withdrawal Taxes
Unless your retirement distributions come from a Roth 401(k) or Roth IRA, you are going to be liable for paying income taxes. Your withdrawal will be taxed by the IRS 10%–37%, depending on your income tax bracket. 

Therefore, in order to withdraw enough to meet your duty, you need to project how much tax you will owe in advance. Again, the exception is a Roth retirement account. 

With a Roth 401(k), you do not pay income tax on withdrawals of contributions or earnings.

Penalties on Early Withdrawals
Anyone who cashes out early faces severe financial penalties. The IRS considers the early withdrawal as income, and hence income is taxable. 

In addition, you will be required to add a further 10% as a penalty for borrowing against the loan if you are less than 59.5 years old, unless you are able to prove that you are in an extraordinary situation of the kind mentioned above.

Due to this, you will end up losing 32% of your early withdrawal to the IRS if you fall into the 22% tax bracket.

This means that, in order to pay off $10,000 in debt, you'd have to withdraw around $14,500 from your retirement account. Do be aware that you'll have a 10% penalty on withdrawals from early Roth 401(k) accounts, although you won't have to pay income tax.

Conclusion

While retirement savings are an easy means of paying off debt objectively speaking, this alternative often comes with a big price. 

Carefully weigh the pros and cons, consider alternative strategies, and maybe consult a financial advisor to make an informed decision that will help you realize your long-term goals.

Author Bio:

Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum. Please contact her on LinkedIn for further information.

Buying a Home With Your Retirement Savings: Dos and Don’ts

 

Using your retirement savings to buy a home can be a thrilling yet daunting decision. Understanding the dos and don’ts of buying a home with your retirement savings is essential for making an informed choice that aligns with your long-term financial goals.

Do Assess Your Financial Situation

Thoroughly assess your financial situation before diving into any real estate purchase. Calculate your total retirement savings and determine how much you can comfortably allocate toward buying a home without jeopardizing your future needs. 

Consult with a financial advisor or fiduciary to ensure that this significant investment aligns with your overall retirement plan. These professionals can provide insights on how this purchase will affect your liquidity and financial security.

Don’t Withdraw Early Without Considering Penalties

Withdrawing from retirement accounts such as IRAs or 401(k)s before reaching certain age thresholds can incur penalties and taxes. Understand the rules governing your specific accounts. 

If you’re under 59, you may face hefty early withdrawal penalties. Even if you’re above that age, consider the tax implications of large withdrawals. 

Explore options such as taking a loan from your 401(k) rather than a direct withdrawal to avoid unnecessary costs.

Do Consider Non-Standard Housing Options

Exploring alternative housing options can help you make a more financially sound decision. For instance, exploring things to know about high-quality prefab homes can reveal cost-effective and sustainable living solutions you may not have considered. 

Prefab homes often come with lower initial costs and reduced maintenance expenses, making them an attractive option for retirees. Evaluate different housing types to find one that fits your budget and lifestyle.

Don’t Neglect Future Expenses

Buying a home is just the beginning; ongoing expenses such as property taxes, maintenance, insurance, and utilities can add up quickly. 

Factor these costs into your budget to ensure you can sustain homeownership without financial strain. Additionally, consider the potential need for modifications to accommodate aging in place. 

Planning for these expenses upfront can prevent unpleasant surprises later on.

Do Explore Financing Options

Even if you have substantial retirement savings, exploring financing options can help preserve your nest egg. Look into mortgages designed for seniors, such as Home Equity Conversion Mortgages (HECMs), which allow you to use home equity for ongoing expenses without monthly mortgage payments. 

Another option is a reverse mortgage, which provides income based on your home’s equity. Consult with a mortgage specialist to understand the terms and decide if these options suit your needs.

Buying a home with your retirement savings is a major financial decision that requires careful consideration and planning. By understanding the dos and don’ts of buying a home with your retirement savings, you can make a choice that ensures financial security and peace of mind.

Assess your financial situation meticulously, consider alternative housing options, and explore various financing avenues. 

Don’t withdraw funds prematurely without considering penalties, and don’t neglect future expenses. 

Remember, knowing the ins and outs of this process can safeguard your retirement lifestyle and provide you with a home that meets your needs and aspirations.

How To Buy a Car Without Decimating Your Retirement Savings

You never know when you’ll need to buy a new car. If you’re nearing retirement age, you may worry that you’ll have to dip into your retirement nest egg to fund a new or used car purchase. 

However, it’s possible to buy a car without decimating your retirement savings. Use this quick guide to making a smart and financially sound car purchase if you’re over 50.

Become an Expert at Car Buying Negotiations

Entering a car dealership with confidence is key. Before you visit, arm yourself with knowledge about the make and model you’re interested in, including the usual selling price. 

Use this information to your advantage by discussing the price based on dealer cost, not the sticker price. Also, don’t hesitate to walk away if the deal doesn’t meet your expectations. Often, dealers will reach out with a better offer to close the sale.

Consider Purchasing a Pre-Owned Vehicle

New cars depreciate rapidly, losing a significant portion of their value in the first few years. Purchase a pre-owned vehicle to get the most bang for your buck. Certified Pre-Owned (CPO) cars offer a balance of value and peace of mind, typically including extended warranties and thorough inspections. 

This choice lets you save money upfront and reduces the impact of depreciation.

Get Creative and Explore Your Financing Options

If you choose to finance your car, shop around for the best interest rates rather than settling for the dealership’s first offer. Consider credit unions and local banks, which often provide competitive rates for older adults. Explore shorter loan terms to minimize interest payments, even if it means slightly higher monthly payments.

Look for Cars With a Remanufactured Transmission

Vehicles with a remanufactured transmission are often a great find. Auto technicians have rebuilt these transmissions to the original manufacturer specs, offering a like-new performance at a fraction of the cost. 

Purchasing a car with a remanufactured transmission could extend its lifespan and support environmental sustainability by reusing materials and reducing waste.

Shop Toward the End of a Dealer’s Quota Period

Correctly timing your purchase can lead to significant savings. Car dealerships have sales targets to meet, typically at the end of the month or quarter. Shopping during these periods can leverage your negotiating power as salespeople are more likely to offer better deals to hit their quotas.

Never Dip Into Savings: Only Spend Interest Earnings

One golden rule in retirement spending is to preserve your capital and spend only the interest or dividends earned. Apply this principle to your car purchase by setting a budget based on the income generated from your investments. 

This strategy ensures you maintain your principal for future needs while enjoying a new car. Learning how to buy a car without decimating your retirement savings involves informed decision-making and smart timing.

By focusing on pre-owned vehicles, exploring creative financing options, and considering the benefits of remanufactured transmissions, you can find a car that fits your lifestyle and budget.

Remember, the key to a successful purchase is to treat it as an investment in your well-being without compromising your financial health.

Financial Success After 50: Retirement Savings and Debt Management

Entering your 50s is a significant milestone in life. It's when many individuals start thinking seriously about their retirement plans and financial future.

For those in their 50s and beyond, balancing retirement savings and managing any outstanding debts is crucial. 

This article will explore key strategies to help individuals aged 50 and above effectively navigate retirement savings and debt management plans.

Assess Your Retirement Goals

The first step in planning a financially secure retirement is assessing your goals. Determine when you want to retire and what kind of lifestyle you envision during your retirement years. 

Do you plan to travel extensively, downsize your home, or start a small business? Understanding your retirement goals will help you calculate how much money you'll need to save to achieve financial success after 50.

Maximize Retirement Contributions

If you have not contributed the maximum allowed to your retirement accounts, now is the time to start. For those 50 and older, catch-up contributions are available in many retirement plans, such as 401(k)s and IRAs. 

Please take advantage of these catch-up contributions, as they can significantly boost your retirement savings in the years leading up to retirement.

Create a Debt Payoff Strategy

While retirement savings is essential, addressing any outstanding debts is equally crucial. High-interest debts like credit card balances and personal loans can eat into your retirement savings if left unchecked. 

Create a strategy to pay off these debts systematically. Consider prioritizing high-interest debts first and allocating extra income by participating in a debt relief program.

Balance Debt Repayment and Savings

Finding the right balance can be challenging. It often depends on the interest rates on your debts and your ability to contribute consistently to your retirement accounts. 

One strategy is to focus on high-interest debts first and gradually shift more of your financial resources toward retirement savings as you pay off debts. An advisor can help you create a customized plan tailored to your circumstances.

Review Your Investment Portfolio

As you approach retirement age, reviewing your investment portfolio is essential. Consider shifting your investments towards a more conservative allocation to reduce the risk associated with market volatility. 

Diversify your investments to spread risk across various asset classes, including stocks, bonds, and cash equivalents. Rebalancing your portfolio is vital for risk tolerance.

Explore Retirement Income Sources

Aside from traditional retirement accounts like 401(k)s and IRAs, explore other potential sources of retirement income. Social Security benefits can begin at 62, but waiting until your full retirement age can result in higher monthly payments. 

Additionally, if you have pension plans or annuities, understand how they fit into your retirement income strategy.

Consider Downsizing

For many individuals in their 50s and beyond, their home represents a significant portion of their wealth. Consider whether downsizing to a smaller, more affordable home makes sense for your retirement plans. 

This can free up equity for retirement savings, reduce housing-related expenses, and simplify your financial life.

Long-Term Care Planning

Long-term care is essential to retirement planning, especially as you get older. Long-term care insurance is crucial for asset protection. It provides financial support if you need extended medical care.

Consult a Financial Advisor

Navigating retirement savings and debt management can be complex. Consult with a qualified financial advisor who specializes in retirement planning. They can help you create a comprehensive plan tailored to your goals, risk tolerance, and unique financial situation.

Emergency Fund

Maintain an emergency fund. It becomes even more critical as you approach retirement. A financial cushion can help weather unexpected expenses without dipping into your retirement savings or debt.

Stay Healthy

Healthcare costs are crucial in retirement. Staying healthy and maintaining a good lifestyle can help reduce healthcare costs in the long run. Regular exercise, a balanced diet, and preventative healthcare measures can improve physical well-being and financial security.

Estate Planning

Ensure you have a will, and consider the importance of powers of attorney, healthcare directives, and other estate planning documents. Proper estate planning protects your assets and ensures your wishes are fulfilled.

Stay Informed

The financial landscape is continually evolving. Stay informed about changes in tax laws, retirement account rules, and other financial regulations that may impact your retirement plans. Knowing these changes can help you make informed decisions about your retirement savings and debt management strategies.

Embrace Lifestyle Adjustments

As you approach your 50s, consider making gradual lifestyle adjustments that align with your retirement goals. This may include exploring more affordable entertainment options and finding creative ways to reduce your overall cost of living. By embracing these changes early on, you can redirect more of your income toward retirement savings and debt reduction.

Adjusting your lifestyle doesn't have to mean sacrificing enjoyment. It's about finding a balance that allows you to enjoy the present while securing your financial future. Consider downsizing your daily coffee shop visits or dining out less frequently, and redirect those funds toward your retirement savings.

Moreover, consider part-time or freelance work opportunities that supplement your income without overwhelming your schedule. These additional income streams can help you pay debt faster and boost your retirement savings.

Conclusion

Entering your 50s and beyond is an exciting phase with unique financial challenges and opportunities. You can confidently navigate this crucial period by carefully assessing your retirement goals, managing your debt, and working with a financial advisor. Remember that it's always possible to take control of your financial future and ensure that your retirement years are genuinely fulfilling and secure.

Author Bio:

Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum. Please connect with her on LinkedIn for further information.

Maximize Your Retirement Savings With These 5 Investment Tips

Retirement might seem like a distant dream, but it's important to start thinking about it now. The earlier you prepare for your golden years, the more rewarding your retirement experience will be.

Investing now is one of the best ways to prepare for your retirement. If you're not sure how to get started, don't worry. 

This blog post will provide you with five investment tips to help you maximize your retirement savings.

Start With A Retirement Plan

Before you even think about investing, you should have a retirement plan in place. This includes setting goals, estimating your retirement expenses, and determining your time horizon. 

Your time horizon is important because it tells you how long you have until retirement, which impacts your investment decisions. 

Once you have a plan, you can create a target asset allocation that aligns with your goals, risk tolerance, and time horizon.

Diversify Your Portfolio

Diversification is the key to reducing risk and achieving better returns. By investing in different asset classes, you can spread your risk and benefit from the strengths of each asset class. 

A diversified portfolio can include stocks, bonds, cash, real estate, and alternative investments. You can also balance your portfolio by investing in domestic and international markets. 

However, make sure you don't go overboard with diversification, as having too many investments can lead to higher fees and lower returns.

Invest Consistently

Consistency is the key to successful investing. Rather than trying to time the market, you should invest regularly and consistently over a long period of time. 

This allows you to benefit from dollar-cost averaging, which means you buy more shares when the market is down and fewer shares when the market is up. 

By investing consistently, you also take advantage of the power of compounding, which can significantly grow your retirement savings over time.

Consider Low-Cost Index Funds

Low-cost index funds are a great way to invest in the stock market without picking individual stocks. Index funds allow you to invest in a broad market index, such as the S&P 500, which provides exposure to hundreds of companies at a low cost. 

Because index funds are passively managed, they have lower fees and outperform most actively managed funds. 

By investing in index funds, you can capture the potential growth of the stock market while minimizing your risk.

Stay Disciplined and Avoid Emotional Investing

The final tip is to stay disciplined and avoid emotional investing. Markets go up and down, but sticking to your plan and avoiding making rash decisions based on fear or greed is important. 

This means avoiding market timing, day trading, and chasing performance. Instead, stay focused on your long-term goals and invest in a disciplined and systematic way. 

If you stick to your retirement plan and investment strategy, you'll be well on your way to achieving your retirement savings goals.

Final Thoughts

Investing can be intimidating, especially if you're new to it. But by following these five investment tips, you can maximize your retirement savings and enjoy a comfortable retirement. 

Remember to start with a retirement plan, diversify your portfolio, invest consistently, consider low-cost index funds, and stay disciplined. 

If you have questions about this, it is highly recommended to reach out to local specialists like Fisher Capital Group for more info. 

With time and patience, you can create a retirement portfolio that meets your needs and provides the financial security you deserve.

Protecting Your Retirement Savings During a Recession

As you know, the year 2020 was difficult. During a turbulent economy, you might have questioned whether you were doing everything possible to keep your retirement savings safe. Perhaps that sparked something inside of you about how you would protect your money during a bona fide recession.

Fortunately, you can do five specific things to stay on track with your financial or retirement plan even when economic times are tough.

Don’t Leave the Market

During a recession, you might feel prompted to avoid the stock market. After all, there are always risks involved, especially during an economic downturn. However, a recession isn’t going to last forever. So, by staying in the market, you are very likely to reap the rewards later on when the market recovers.

Considering that people live longer today, that means they need income longer. To overcome inflation and benefit from financial growth, you want to keep investing your assets. As long as you have a solid financial plan in place, you’ll come out ahead.

A younger person might just ride out a recession while waiting for their portfolio to recover. In comparison, an older person who withdraws money regularly from savings will need a mix of assets and investments to stay untethered from the market.

Be Sure to Rebalance

While working, you can benefit from financial growth and safer assets that provide stability by having a mix of riskier assets in your portfolio. However, as you get closer to retiring, you’ll need to go with less risky options.

Not only do you want to set your asset allocation, but as you get closer to retiring, make sure to also regularly rebalance your investment portfolio. This is important since a long period of stock market returns can put you at greater risk.

For example, if your asset allocation is 80 percent stocks and 20 percent safe assets, years of growing in the stock market could turn that into a 90/10 scenario. In other words, if you have stocks that outgrow bonds, this would likely happen. 

By rebalancing, you can maintain the healthier 80/20 asset allocation. It’s simply not wise to take more risk than you need to when it comes to your financial plan.

Run Recession Scenarios On Your Plan

Everybody should understand the risk that their retirement portfolio contains. How will your portfolio do if we have another recession that is like the recession in 2008? 

What about the 2001 recession? Fortunately, there is a really comprehensive retirement tool made for consumers that allows you to do just that. The WealthTrace Planner is a retirement and financial planning application that allows you to choose which recession you want to mimic. 

You can run your entire retirement plan using a recession scenario to see how much you are impacted. It’s a great way to flesh out the risks you might be taking and if you are diversified enough.

Guarantee Some Retirement Income

Here’s another great way to come out of a recession unscathed. Utilize guaranteed income sources not affected by stock market volatility and accumulate a cash reserve. 

While you might experience a slight loss, it wouldn’t be anything near what you could lose by not taking the appropriate steps.

Stable sources of retirement income include things like pensions, Social Security benefits, and annuities. If you’re close to retiring, keep enough cash in a safe place like in a savings account at a reputable bank. 

You might also consider the cash value associated with a life insurance policy. If necessary, you could use that money as a reserve.

Don’t Forget to Diversify

An excellent way to reduce the risk of your portfolio caused by a recession is to diversify. That way, you can keep your investment portfolio from crashing no matter what’s going on with the economy. Now, if the market fluctuates, a portion of your portfolio could respond in a way that offsets any negative impacts. 

For example, bonds usually do well during recessions while stocks do not. This is what investment professionals call negative correlation and it is key to diversification.

You always want to have checks and balances built into your portfolio, especially during a recession. The key is to have a mix of investments, including stocks, bonds, and cash, as well as a mix within different sectors.

Potentially Rely on a Financial Advisor

When it comes to protecting your money, there’s no room for pride. Instead of assuming you have all the right answers, it might be better to talk to a financial advisor. 

Again, during a recession, you need expert advice and guidance. Based on your specific goals, an advisor will provide you with innovative strategies to achieve them.

The Bottom Line

Last year was a huge eye-opener for millions of people as to the importance of protecting their money and other assets. Although the pandemic was devastating and continues to cause problems, you can use it to understand why it’s so important to get help from your own retirement planning software or a financial advisor. 

With the right information, you’ll make sound decisions regardless of where you are in life or when you want to retire.

At Your 50s? Follow These Strategies to Save for Retirement

It is possible to build your retirement savings by following some proven strategies, even if you’re 50 or older. If you are worried about your financial future, it’s never too late to put together a solid financial strategy that aligns with your goals.

According to a 2019 survey of 2000 participants performed by GOBankingRates.com, 64% of those Americans expected to retire with less than $10,000 in their retirement savings account.

Don’t worry if you’re a part of this group. It’s never too late to start saving, even if you’re approaching retirement. According to retired certified financial planner Dick Bellmer, a former president of the National Association of Personal Financial Advisors, people should regularly review their retirement plan a minimum of every three years.

Let’s assume you’re reaching 50 and have yet to put anything aside for retirement. So, what are your options?

Here’s how you can begin your retirement savings plan.

Set up automated savings and improve budgeting strategy

First, evaluate your budget and remove any overspending costs to free up cash. According to Nadine Marie Burns, a CFP in Ann Arbor, Michigan, food is one area where many people waste money.

By creating meal plans, you may save over $100 each month from wasted or unused food.

Come up with a realistic savings goal and how much you can save automatically. If that’s too much to take in at once, focus on tiny modifications to your retirement plans over time.

George Gagliardi, a certified financial planner in Lexington, Massachusetts, suggested that you plan to live a long life and adjust your retirement income projections accordingly.

You have no influence over how long you live, but according to the Social Security Administration, the average 50-year-old man may expect to live another 30 years to 80.

On the other hand, a 50-year-old woman can expect to live for 33 years, to 83.

Maintain your investments

Set up automatic investments if you have a non-retirement portfolio or if you’re self-employed, managing your retirement fund. You will enjoy the benefits of dollar-cost averaging.

Regular investments can help you acquire more shares when stock prices fall and get fewer stocks when they are high.

As a bonus, you won’t have to remember to write a check each month.

According to Sandra Adams, a CFP in Southfield, Michigan, you also need a mix of different investments. Having investments of at least 60% in stocks will help you attain your objective over time.

However, don’t take too much of a chance when the market falls. Hopping in and out of the investment market might create severe problems in your plan, and you can’t manage those obstacles if you’re already behind schedule.

Pay off your debts

Do you have credit card debt, medical debt, or any other unsecured debts?

Pay them off as early as possible to free up money for savings. If you have a mortgage, create a plan to pay it off before you retire. Malcolm Ethridge, a CFP in Rockville, Maryland, suggested that removing housing expenses such as mortgage payments can lower the amount of annual expenses.

As a result, it will also reduce the amount of annual income you actually need to save for retirement.

Natalie Pine, a CFP in College Station, Texas, recommends avoiding future debt such as car loan debt. Instead, she recommends putting your income into a new account for buying a new car.

This will help you pay for a car in cash and spend less overall. Avoid taking out high-interest loans such as payday loans

Save for emergencies

Also, keep an emergency fund separate from your retirement savings to handle unexpected needs.

You can build one by putting money into it from bonuses or job promotions.

Consider insurance, especially disability insurance. It will be challenging to recover from any financial crisis if you can’t work anymore at 50 and haven’t saved.

Make absolutely sure you have sufficient home, auto, and umbrella coverage. Make sure you’re covered by health insurance.

Maximize your contributions if possible

According to James Shagawat, a CFP in Paramus, New Jersey, if your company offers a retirement plan, make sure you invest enough to receive the full match. If you’re 50 or older, you can contribute up to $26,000 annually.

You should also ask for any other retirement savings plans offered by your organization.

If your employer matches your contribution with offering corporate stocks, you may face “concentration risk.”

According to the Employee Benefit Research Institute research, 401(k) participants who receive corporate stocks as their employer match might end up investing more than half of their entire account balances in those stocks.

If this happens, if your organization performs poorly, it may impact your returns.

Contributions to a Roth IRA with diversified investments might help offset this issue.

Since Roth contributions are deposited with after-tax dollars, your withdrawals can’t be taxed once you reach retirement age.

If you’re 50 or older, you can contribute up to $7,000 every year. In 2021, if you’re single, eligibility will be phased out between $125,000 and $140,000 of your MAGI [modified adjusted gross income], and if you are married and filing jointly with your spouse, it will be $198,000 to $208,000.

Justin Meinhart, a CFP in Winston-Salem, North Carolina, suggests making these investments early in the tax year rather than waiting until the April 15 tax-filing deadline.

Work as long as possible

According to Sean Pearson, a CFP in Conshohocken, Pennsylvania, those days are gone when people used to retire at 60 or 62.

Now, people are working beyond the age of 60 or 65. They prefer investing their time in something less stressful than a high-stress job, which involves 40-to-50-hour work per week.

Following this strategy, people can continue to contribute to traditional IRAs even when they reach the 70s, as per the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019.

Work on side hustles or search for 'found money'

Do you still need more retirement income? Then look for a part-time job you’ll enjoy or sell items you don’t need at an auction.

According to CFP Benjamin Offit of Towson, Maryland, you might consider selling your property and downsizing or moving to a smaller area with lower housing rates.

Downsizing can result in significant savings that can be used for retirement.

Finally, Sarah Carlson, a CFP in Spokane, Washington, recommends checking your state’s lost asset site for any old accounts. If you’ve worked for other companies, you may have accounts that have been turned over to the state.

Look for these accounts and reconnect with them to collect the money you forgot to withdraw or have lost track of.

Open a Health Savings Account (HSA)

Before you retire, you need to consider how you will manage unforeseen medical bills. Large medical expenses can suddenly exhaust a lifetime’s worth of money.

According to a 2019 Fidelity Investments estimate, a couple in their mid-60s will need $285,000 in retirement to meet health care costs.

Apart from that, people reaching their 50s can’t ignore the exorbitant cost of long-term care in nursing homes. According to a Genworth research, the typical annual cost of a semi-private room in a nursing home in 2018 was $89,292.

Considering these facts, people must plan retirement after including future medical expenses.

Long-term health insurance is one option that covers extended medical care such as nursing and assisted living. If you meet the requirements, you should start a health savings account immediately.

Your taxable income will be reduced once you get this insurance. Your investments will grow tax-free. Once you reach the age of 65, you can withdraw funds without penalty or tax (it will be taxable if used for anything besides qualified medical expenses).

You should do some homework and choose the best features for you, such as low fees and low minimum balance requirements.

Boost your Social Security benefits

The earliest you can begin receiving Social Security benefits is at the age of 62. However, at age 50, it’s a good idea to start thinking about how you’ll collect benefits. You may estimate your benefits using this Social Security calculator.

According to experts, most people claim Social Security benefits too soon.

That’s so unwise. People can earn more from Social Security benefits if they postpone retirement.

According to Elijah Kovar, co-founder of Great Waters Financial in Minneapolis, taking Social Security at 70 instead of 62 increases your monthly payout by around 76%.

Waiting to receive Social Security is also a great idea to make more money if you’re married. The surviving spouse gets the bigger Social Security payout if one spouse outlives the other.

You’ll have a larger pot to draw in retirement if the primary breadwinner waits to claim benefits.

Your tax situation is another crucial factor to consider while taking Social Security benefits. It’s the best source of income we have outside of Roth IRAs, from a tax point of view.

Implementing techniques that reduce taxable income, such as donation, charity, etc., can help you maximize your Social Security income.

Use income from traditional pensions

If you get a defined-benefit pension plan through your current or past employer, you should receive an individual benefit statement once every three years.

Once a year, you can also ask for a copy of the statement from your plan’s administrator. The statement should indicate the advantages you’ve gained as well as when they’ll become fully available to you.

It’s also a good idea to understand how your retirement benefits are calculated. Many programs use formulas depending on your income and years of service.

So, you might be able to make more money by working longer.

Don't ignore taxes

Finally, keep in mind that not all the money you save for retirement is yours to enjoy.

When you take money out of a regular 401(k) or traditional IRA, the IRS taxes you at your ordinary income rate.

So, if you’re in the 22 percent tax bracket, each $1,000 you take will only bring you $780.

So you must plan ahead to keep as much of your retirement money as possible. Relocating to a tax-friendly state might be a wise option.

Author Bio: Lyle David Solomon is a licensed attorney in California. He has been affiliated with law firms in California, Nevada, and Arizona since 1991. As the principal attorney of Oak View Law Group, he gives advice and writes articles to help people solve their debt problems.

4 Financial Options to Kickstart Your Retirement Savings

Even if you enjoy the job you currently do, chances are that you don't want to do it for the rest of your life. This means that if you've gotten behind in saving for retirement, it's important to find ways to kickstart your retirement savings so that you don't spend the rest of your life working. 

While many good options are available, there are a few options that stand out for their effectiveness and relative security.

Max-Out Your Retirement Contributions

If you have the financial means, it's important to max-out your retirement contributions every year that you work. For most people, the retirement contribution limit is $19,500, which is plenty to help most people reach their savings goals. 

Another key aspect of this is to ensure you're working for a company with generous matching contributions to help your money go even further.

Invest in a Home

Although it's not the most direct way to invest in your retirement, investing in a home can actually be a great step to help you achieve your retirement goals. If you buy a home when you're young, you'll likely have quite a bit of equity built up by the time you reach retirement age. 

This will allow you to take out a reverse mortgage that can provide a major cash infusion to help you live more comfortably when you retire.

Don't Take Raises for Granted

Rather than seeing a pay raise as a way to buy more stuff, it's good to see this extra cash as a way to invest more in your future. If you use all or some of an annual pay increase to contribute more to your retirement accounts, you will be able to retire sooner and live more comfortably, even if it requires some sacrifices in the present. 

Plus, when you consider the tax advantages of contributing to a retirement account, you can help your raise go further than the actual amount that your pay increased.

Start a Side Job

If you have a hobby that you enjoy, you may want to consider turning that hobby into a lucrative side business. Countless websites exist to allow you to market just about any skill or product, allowing you to bring in extra cash to augment the pay of your full-time job. 

This extra cash can be used entirely to quickly fill your retirement coffers so that your regular paycheck can go to saving for a rainy day.

Whatever you do to kickstart your retirement savings, the key is to avoid wasting time whenever possible. The longer you wait to start investing in your retirement in earnest, the harder it will be to reach your savings goals. Therefore, even if you only have a little to invest in your retirement, there's no time like the present to get started.