What you can do to protect your retirement savings.
With mind-numbing stories coming out about who won and who lost the debt deal debate, and whether the debt deal really solved anything or only pushed it to a super committee, individual investors are still bewildered, frustrated and nervous. Now, with the stock market falling and interest rates behaving in seemingly irrational ways, Americans are skeptical as to the right strategy to adopt today in planning for retirement.
Here are some smart moves that you and other investors can consider making right now that will save you money and perhaps help you sleep a little more peacefully.
Save taxes on additional savings –
Statistics show that investors are on average increasing their savings, and while economists see that as a negative for the economy, I view this as a positive. However, if the savings are invested in accounts, funds, etc. outside a 401(k) or IRA, everyone should be tax-smart with these savings. While we don’t know what any “tax reform” might bring, I suggest you consider investing a portion of your retirement savings in a no load variable annuity (VA). Not only will that enable you to defer taxes on investment earnings until these funds are withdrawn, it could also help result in a lower tax bracket for you. That might be particularly helpful if tax reform eliminates or caps some of your favorite deductions.
In terms of timing, with the value of these taxable accounts taking a beating these past few days, now may be the time to sell a portion of those securities with little or no gain, and have any market recovery take place in a tax-deferred account. Also, with the tax benefits of annuity-investing in otherwise taxable fixed income options, this new VA account could be invested more conservatively.
In general, the time to move up in tax class, e.g., regular IRA to Roth IRA, or taxable to tax deferred, is on a market downturn.
Lower Fees – While the government is
doing some belt-tightening, as are those who may be increasing their savings, why not ask financial service providers to do the same? That means you should:
- Look for no load products;
- Invest in low cost index funds; and
- Find an advisor (if you use one) that charges asset-based fees of .50% or less.
These lower fees make any additional savings even more valuable. If the provider argues that you’ll get more value from their higher fees, then I would counter by stating that in this environment, the economy and the government moves or non-moves trump whatever the provider offers.
These are just two of my Seven Golden Rules intended to dramatically increase sustainable retirement income from Personal Retirement Savings.
You can find the Seven Golden Rules, and more about saving and investing for retirement, at www.GoldenRetirement.com.
Golden Retirement, LLC