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For the past few years I’ve been obsessed with saving up for retirement. For most of my 20s I rolled my eyes at the thought of putting money in a 401 (k) or an IRA, but when I got into my 30s it became a priority.
I saw adults in my family nearing retirement with little savings or a financial plan. I wanted to make sure I could be smart with my money now and in the future. That’s why I opened a SEP IRA a few years ago and slowly increased my monthly fee.
Earlier this year, I began to wonder if I could do other things besides my SEP IRA contributions to save for retirement. At this point, I reached out to a handful of financial planners for tips on how to save for retirement other than just depositing cash into a standard retirement account.
1. Consider a health account
I’ve heard many of my freelance and self-employed friends talk about health savings accounts, but I never knew how valuable it can be to have one for retirement.
Patrick King, a financial planner, said an HSA is a fantastic and often overlooked retirement plan tool, especially for high earners.
“It’s a means of deferred tax savings that, if left unused, could potentially turn into some sort of IRA once you’re 65 and Medicare kicks in. Not to mention having access to HSA funds on the go to serve its intended purpose: medical expenses, “said King.
2. Work on becoming debt free
One great tip I’ve been given that can really benefit your finances in retirement is to make sure you reduce your debt years before you leave work.
“Sounds like a reasonable reaction, but we’re amazed at how many people are retiring with car loans or mortgages,” said financial planner Craig Johlfs. “In our opinion, it comes down to intentionality. Start early, after 10-20 years, and make a concrete plan to be debt-free through retirement. Entering retirement plans with a debt burden can put a strain on your other cash equivalents.” You may need to make larger payouts to cover your monthly overhead. “
3. Watch out for fees
Something I didn’t consider was the fees I might be incurring on some of my retirement accounts. Dennis J. O’Keefe, a financial planner, recommended looking out for mutual fund fees when investing cash in mutual funds as part of your retirement strategy.
“While index funds and ETFs dominate the market, I am shocked how often someone owns a fund with a 1-2% management fee. It just eats up the returns. The difference between 9% and 10% in 25 years is life changing,” said O’Keefe.
4. Consider a life insurance strategy
One interesting thing I’ve learned during my own financial journey is that everything you do fits together like pieces of a puzzle. For example, I never realized how something like life insurance could come into play in relation to my retirement savings.
Financial planner Brian Carlson said that properly structured life insurance can be a smart tool for your medium to long-term planning because a policy with a cash value can offer tax benefits.
However, he cautioned, “You need to be careful when purchasing life insurance for your retirement savings because life insurance is probably one of the most complex financial instruments. So it is very important that you work with an advisor who you trust and who knows how structure the guidelines in such a way that they are as tax efficient as possible. “