Worried about your finances in retirement? Discover the best strategies to keep your money growing in retirement. From maximizing contributions to diversifying investments and choosing the right annuities, this guide has it all.
Summary
- Take full advantage of tax-advantaged retirement accounts, such as 401(k)s and IRAs, to substantially increase your savings.
- Diversifying your investment portfolio and regularly adjusting it helps balance growth and stability, supporting your long-term financial goals.
- Consider delaying Social Security benefits to enhance monthly payments, leading to greater financial security during retirement.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
1. Maximize Contributions to Tax-Advantaged Retirement Plans
Contributing to tax-advantaged retirement plans like 401(k)s and IRAs can significantly enhance your retirement fund. These plans offer significant tax benefits that can enhance your retirement savings.
The annual contribution limit for a 401(k) in 2024 is $23,000, which can substantially reduce your taxable income for that year.
Tax deductible contributions to traditional IRAs may be tax-deductible, providing further tax savings and making them an attractive option for retirement planning.
Individuals aged 50 and over can benefit from catch-up contributions. For IRAs, the contribution limits are $7,000 in 2025, with an additional $1,000 catch-up contribution. This allows older workers to boost their retirement savings as they approach retirement age.
Roth IRAs offer another valuable option, where contributions are made with after-tax dollars, and withdrawals during retirement are tax-free. This can be particularly beneficial if you expect to be in a higher tax bracket during retirement.
If your employer provides a 401(k) plan, contribute enough to fully capitalize on any company match to greatly enhance your retirement savings.
Employer-sponsored retirement plans with company matches provide an effective way to increase your retirement plan savings without additional cost to you.
Should your company not offer a 401(k), setting up an IRA or Roth IRA ensures you still benefit from tax-advantaged retirement plans. Maximizing contributions to these plans can significantly enhance your retirement savings and help you achieve your financial goals.
2. Diversify Your Investment Portfolio
Effective retirement planning often hinges on diversification. A well-structured asset allocation can balance short-term stability with long-term growth, essential for a robust retirement portfolio.
By spreading your investments across various asset classes—such as stocks, bonds, and cash—you can enhance your portfolio’s performance over time and reduce the risk associated with any single investment.
Approaching retirement, gradually reducing stock holdings and increasing bond investments can mitigate market volatility. This strategy helps mitigate market volatility and provides a more stable income stream.
For instance, a suggested allocation within stocks could include 60% in U.S. large-cap, 25% in developed international, and smaller percentages in small-cap and emerging markets.
For bonds, a diversified approach might include 45% in U.S. investment-grade bonds, with the remainder spread across Treasuries, high-yield, and international bonds.
Regular review and adjustment of your asset allocation become crucial as you near and enter retirement. A thorough portfolio review at least three years before retirement can help manage risks and align your investments with your financial goals.
This proactive approach will help you maintain a balanced portfolio that supports both growth and income needs during retirement.
3. Utilize Fixed Index Annuities
Fixed index annuities serve as a valuable tool in retirement planning. These annuities allow you to benefit from market increases while protecting your principal from losses.
Typically tied to stock market indexes, they offer potential for partial index growth, appealing to retirees seeking growth without excessive risk.
A key feature of fixed index annuities is the participation rate, determining how much of the index gain is credited to your account. For example, if the index grows by 10% and your participation rate is 70%, you would receive a 7% return.
Additionally, these annuities often have a guaranteed minimum interest rate, typically ranging from 1 to 3 percent, ensuring that your investment continues to grow even during market downturns.
Unlike multi-year guaranteed annuities (MYGAs) that provide a fixed interest rate, fixed index annuities offer greater growth potential with some limits on maximum returns. While MYGAs are simpler with a guaranteed fixed rate, fixed index annuities provide a balance of growth and protection.
Understanding the differences and benefits of these annuities helps you choose the one that best aligns with your retirement income needs and risk tolerance.
4. Explore Multi-Year Guaranteed Annuities (MYGAs)
Multi-year guaranteed annuities (MYGAs) offer a guaranteed interest rate for periods ranging from three to ten years. These annuities offer a fixed rate of return, which can be particularly appealing for retirees looking for stability and predictable income.
With MYGAs, you know exactly what your investment will earn over the term, making them a reliable option for growing your nest egg.
A significant advantage of MYGAs is their tax-deferred growth. The interest earned on these annuities is not taxed until you begin withdrawals, allowing your investment to grow more efficiently.
Additionally, MYGAs are protected by state insurance guarantees, providing an extra layer of security for your retirement savings. Renewal options are available, but the interest rate may change based on current market conditions at the time of renewal.
The growth potential of MYGAs depends on the term you choose. For example, a MYGA with a five-year term might offer a different interest rate compared to a ten-year term.
Selecting the appropriate term and understanding renewal options helps maximize MYGA benefits and ensure steady retirement fund growth.
5. Consider Income Riders for Annuities
Income riders can be a valuable addition to annuity contracts, providing a higher guaranteed income stream for life versus other options. These riders are especially useful for retirees who want to ensure a consistent income during their retirement years without the need for active portfolio management.
Setting up these annuities correctly is crucial to maximize the benefits of income riders.
The annuity calculator can also determine the required premium to reach your financial goals.
Using this resource helps make informed decisions about annuity investments and ensures a stable income stream in retirement.
Professional guidance can help you navigate the complexities of income riders and tailor your annuity investments to your specific retirement needs. Leveraging these tools and expert advice helps you confidently plan for a financially secure retirement.
6. Invest in Dividend-Paying Stocks
Dividend-paying stocks are an excellent investment option for retirees, providing both income and capital appreciation. Companies with a consistent history of dividend payments demonstrate financial stability and a commitment to returning value to shareholders.
This makes them a reliable source of income during retirement, especially in declining markets.
A well-structured dividend stock portfolio incurs minimal fees, significantly improving net returns compared to high-fee investments like annuities. Focusing on dividend-paying stocks allows for a steady income stream and potential capital growth.
This dual advantage makes dividend stocks an attractive option for those looking to grow their retirement savings.
Investing in dividend-paying stocks requires careful selection and management. It’s essential to choose companies with a strong track record of paying dividends and the potential for future performance.
Diversifying investments across various sectors and industries reduces risk and enhances retirement income stability.
This approach ensures that your investments continue to generate returns, even in fluctuating market conditions.
7. Protect Your Principal Balance
Maintaining financial stability throughout retirement requires protecting your principal balance. As retirees, it’s essential to assess your immediate cash needs and consider increasing low-risk investments to cover essential expenses.
This approach helps ensure that you have enough funds to meet your day-to-day needs without dipping into your principal.
While low-risk investments provide stability, it’s also important to retain some equity investments to combat inflation and enhance the longevity of your retirement funds.
Equities can offer growth potential that outpaces inflation, helping you maintain your purchasing power over time. However, be aware of sequence of returns risk, as early market declines can significantly impact your financial health.
Balancing low-risk and equity investments protects your principal while allowing for growth.
Regularly reviewing your investment strategy and adjusting it as needed is key to protecting your principal balance.
Working with a financial fiduciary can help you identify potential risks and develop a plan that aligns with your financial goals.
Taking these steps ensures your retirement savings remain intact and continue to grow.
8. Monitor and Adjust Your Investments Regularly
Post-retirement, it’s crucial to review your investment portfolio regularly to ensure it aligns with your financial situation and goals. Shifting your focus from long-term growth to managing short-term risks and cash flow needs is essential for a successful retirement.
Quarterly reviews of your investments help stay on track and make necessary adjustments.
Emotionally driven decisions during market volatility can jeopardize your retirement plans. It’s beneficial to work with a trusted advisor who can provide professional guidance and help you make informed decisions.
A financial professional can help identify potential risks and gaps in your retirement planning. Personalized retirement planning can address specific concerns like healthcare costs and inflation, which impact long-term financial stability.
Booking a call with a retirement advisor can also help ensure that your income strategies are aligned with evolving economic conditions and personal circumstances.
Regular monitoring and adjustment of your investments help maintain a balanced portfolio that supports your retirement income needs and financial goals.
9. Delay Receiving Social Security Benefits
Delaying Social Security benefits past full retirement age can significantly increase your monthly payments, enhancing your overall retirement income. For instance, waiting to claim benefits until age 70 can result in a monthly payment that is 132% of the original benefit.
This increase can provide greater financial security and a higher standard of living in retirement.
Beneficiaries who wait to claim Social Security can receive higher monthly payments, reflecting a percentage increase based on how long they delay. This strategy can be particularly beneficial for those who have other sources of income and can afford to wait.
Maximizing your benefits through delay positively affects overall retirement income and provides greater survivor benefits for dependents.
Delaying Social Security benefits until full retirement age or later can lead to enhanced financial security in retirement. It’s important to carefully consider this strategy and consult with a financial fiduciary to determine the best timing for claiming your benefits.
Informed decisions about Social Security ensure a more secure and comfortable retirement.
Conclusion
Keeping your money growing in retirement requires a multifaceted approach. By maximizing contributions to tax-advantaged retirement plans, diversifying your investment portfolio, utilizing fixed index annuities, and exploring MYGAs, you can build a robust financial foundation.
Adding income riders to annuities, investing in dividend-paying stocks, protecting your principal balance, and regularly monitoring your investments are crucial steps to ensure long-term financial stability.
Need help with finding the best annuity?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have
