From: Kyle Ryan
Now, a year on from the COVID-19 pandemic, many people’s finances are in disarray. The loss of jobs and the reduction in working hours put a strain on the daily household budget – let alone long-term planning. For some, the financial burden has affected their nest egg.
A recent survey found that nearly one in three working Americans withdrew or borrowed money from an IRA or 401,000 during the pandemic. Almost two thirds used these retirement savings to cover the cost of living.
For millions of households, March 2020 through March 2021 was a difficult time financially. Many had to take a back seat to old-age provision.
Amin Dabit, certified financial planner Personal capitaladvises investors to reset their focus in the long term.
“Don’t be ashamed if you feel regret or have made mistakes in your retirement plan,” he said. “It’s never too late to change the course of your retirement. You may need to make some adjustments, such as working longer. However, we recommend that staff do their best to try to correct course.”
Knowing where you are can help you find out where you are going. Here are three common money mistakes and insights on how to avoid them.
Mistake # 1: Delay in retirement planning
Retirement is often a person’s most expensive expense. The golden years often cost more than four years of college, a new home in most places, and your children’s college education. However, 48% of Americans over 55 haven’t saved anything for retirement. In other words, nearly half of Americans who are about to retire have absolutely nothing to feed them.
When is the best time to save for retirement?
“It’s now,” urges financial coach Tori Dunlap, founder of Her First, for $ 100,000. “And if you’re waiting for the perfect time to start saving for retirement, I’ll tell you a little secret: retirement can be hard to come by without investing.”
Dunlap hit her first money milestone – that is, namesake $ 100,000 – with the Personal capital Money management tools. This free online technology enabled her to visualize her monthly savings goals and plan for the future in various scenarios.
People facing financial challenges during the pandemic may need to take a tiered approach to investing in retirement plans.
Erin Gobler, a Millennial Money Coach, offers the following tips for individuals looking to reduce debt, build savings, and keep their focus on retirement.
1. Check your budget
The more leeway you have in yours budgetThe faster you can pay off your debts as you retire money every month. With the help of online financial tools, you can find out where your money is going now. This allows you to identify spending hotspots and redirect funds towards greater debt or investment repayment.
2. Build your emergency fund
An emergency fund helps ensure financial emergencies – car repairs, equipment swaps, whatever you call it – don’t lead you into higher debt. For those currently in debt, Gobler suggests making your minimum debt payments and putting extra money in an emergency fund.
Alison Heisner, Chartered Financial Analyst at Personal Capital, recommends saving enough money to cover expenses for three to six months based on your average monthly expenses.
3. Maximize your tax benefits
Saving for retirement brings tax benefits. Contributions to a 401k or traditional IRA are pre-tax, which means the contribution is deducted from your taxable income, thus reducing the taxes you will pay for the year. Additionally the first $ 2,500 The student loan interest you pay each year is tax deductible.
- Set specific goals
It’s easy to say that you want to get out of debt or retire early. But for many people these words never become action.
“When you decide to invest in retirement, write down a specific plan,” suggests Gobler. “Outline how much you will be investing in investments each month.”
And do it automatically. When you set up automatic contributions to your 401k, Roth IRA, or other retirement investment vehicle, you have less to worry about.
Dunlap said she used visualization: “Imagine you’re 65 years old. Imagine how great you are as a retiree. People who create visual goals are more likely to achieve them. So do your best to to imagine what your ideal retirement would be. ” look.”
Mistake # 2: Pulling out of retirement savings
The pandemic has shown us that life can be unpredictable. Last year’s CARES act responded to economic hardships caused by the COVID-19 pandemic. In 2020, retirees could make temporary penalty-free withdrawals from certain retirement plans for coronavirus-related expenses.
A survey found that Retirement Planner Significant Sums of Money Pulled Out: 32% of respondents said they had withdrawn $ 75,000 or more from a retirement account, while 58% of those who had borrowed had borrowed between $ 50,000 and $ 100,000.
In addition to covering the daily cost of living, people used the money for a variety of expenses:
- 41% put it in the direction medical expenses
- 32% funded home repairs
- 26% paid for car repairs
- 23% covered the tuition fees
- 21% helped family members
There are many good reasons to get early on with your retirement savings. However, to stay on track, recommends Debbie Macey, Senior Financial Advisor at Personal Capital Avoid the setting that your retirement benefits are accessible.
“Think of it this way: instead of putting money away, you actually pay it up,” she said. “So before you take money out, ask yourself, do you really need the money now?”
Don’t just keep this conversation in your head, counselors say. Reach out to both experts and those who know you best.
Mistake # 3: Not talking about retirement
A Current survey on Love & Money found that people postpone important money conversations with their significant other. More than half (58%) of Americans surveyed said they would not talk about their retirement savings outside of marriage. Of these, 12% never think it appropriate to discuss plans after work.
Lacey Cobb, director of counseling solutions at Personal Capital, says the conversation doesn’t have to be too difficult. When your relationship reaches the point where you may spend your future together, it’s time to talk about budgeting and general saving for the future.
“That should be the focus: plant the seed and generally start early to prepare for future success,” she advised.
While you are navigating the conversation with your significant other, the Personal capital annuity planner could be a valuable tool in aligning the two of you with your vision for the future. Almost 3 million people are using this technology to see what they can do to improve their chances of success in retirement. With your partner, you can run a variety of scenarios, see how your plans would have performed in historical market downturns, and create a retirement spending plan.
In addition to speaking to a significant other about retirement, people with a complex financial life should consult a financial advisor.
More than half (52%) of working Americans agreed that after all the uncertainty of 2020, they are looking for more guidance on their financial strategy this year, a recent survey found. This includes consulting a financial advisor for the first time or more frequently, or using resources in the workplace.
Younger people are far more likely to seek advice: 64% of Millennials and Gen Z respondents plan to seek more advice, while only 38% of Boomers say they want more help.
One of the most important roles of one Financial advisor removes emotions from monetary decisions. When a person has worked for years amassing personal wealth only to see it fluctuate during market volatility, emotional distancing is not always easy.
“It is sometimes difficult to keep the noise of people telling you what the market is going to do next and what to buy or sell,” said Craig Birk, chief investment officer, Personal Capital. “When you work with a good financial advisor, you can call an objective person if you are afraid or not sure what to do.”
About the author
Kyle Ryan is a member of the Personal Capital Advisors Investment Committee. He is also executive vice president responsible for sales, customer service and the investment business of Personal Capital Advisors. Kyle previously held senior positions at Merrill Lynch and Fisher Investments. While at Fisher, he was responsible for managing nearly every aspect of the company, including all global trading operations, investment research, portfolio implementation and high net worth sales. Kyle graduated from the University of California at Los Angeles with honors.
This content is for informational purposes only and does not constitute investment advice.
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