By Jim Gaines
Saving money can be difficult for many people and especially saving for long term needs such as retirement. A good starting point is to look at your current finances and see exactly how much can be saved for retirement, if you are married, a frank planning discussion with your spouse could be of value. How much is the family budget? Howe much can be set aside for long term growth? Simple and yet very important and often hard to answer questions.
Let me help you with a check list that has been useful to others. These questions may help you define your situation and set aside an outline for action.
Q. Do you actively monitor your 401k or IRA statements each quarter? Do you review the assets in your accounts to see if they are performing as you had expected?
Q. If you own mutual funds in your accounts, have you reviewed the fee schedules being charged? Expenses charged by mutual fund companies can vary wildly, be sure you are fully aware of the percentages you are being charged. Remember, you pay these fees and expenses even if you are losing money. A very good source to learn about fees charged in mutual funds is the financial regulatory agency, here is their link: http://apps.finra.org/fundanalyzer/1/fa.aspx
Q. Do you contribute to your 401k plan the maximum allowed by law. Take advantage of any employer matching programs. Here is a link from the IRS for current maximum contributions: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits
Q. Learn about the “Sequential Returns Theory,” it goes like this. It is better to have investment losses at the beginning of the investment period than at the end. You have a better chance of making up the gains early in the investment period than near the end. In other words, when retirement time is further away (in years), you can take more risk, but as it becomes closer, safety and security should be considered. If you have been losing money or not accumulating as you had planned and are within 6-7 years of retirement, ask your benefits manager about any guaranteed interest rates offered in the plan.
Planning your retirement means having a basic roadmap, a roadmap working toward your ultimate goals. Like all roadmaps, there are twists and turns, your retirement accounts can have the same things. Adjust and make sure you have control over your asset allocation and make sure it begins to change as you near the time when accessing your funds can provide the best “golden years” for you. Many people do not know that you can rollover your 401k to a self-directed IRA any time after age 59 1/2 even if you are still working. This allows you far more options when it comes to finding ways to create an income stream. Many people will ultimately select an annuity as their actual retirement vehicle once their accumulation years are over. Annuities are not for everyone bout for these where a guaranteed income stream is important; they can be exactly the correct choice.