A retirement plan is a work in progress. You begin the plan with certain assumptions about your spending, inflation, taxes, investment returns, and other factors. Reality, however, will not match your assumptions as the years roll on. That is why every few years, the plan needs to be adjusted. Once you are in or near retirement, you should make regular adjustments every year or so to avoid having to make less frequent but more severe adjustments.
But recessions, bear markets and historic low-interest rates on income investments and other factors can put major roadblocks in the way of many retirement plans. If your retirement plan is off course, consider taking one or more of these actions to get back on track to rebuild your retirement.
- Earn more investment income. If you were caught by the steep drop in yields on safe income investments, consider some high-yield bonds. If you prefer the safety and security of bonds, you can earn higher yields than from treasuries however you will need to take on more risk to do so.*
- Work longer. In the last few years, Americans started retiring a little later and going back to work after first retiring. These trends should continue. The labor shortage in many fields, even during the recession, makes working an easier decision. If you can add to your retirement fund most of your salary for two or three years, your retirement funds should really be beefed up.
- Reduce taxes. There are a host of ways you can reduce taxes on your taxable investments, IRAs and more. For example, you could convert a regular IRA to a Roth IRA. While you will have to pay taxes now on the amount you convert, the amount you pay in taxes may be less than what you would pay if tax rates go higher in the future. Consider Qualified Charitable Distributions to reduces taxes on Required Minimum Distributions. For taxable accounts consider tax loss harvesting.
- Reduce housing costs. If your retirement plan needs major changes, consider moving to a smaller home or one in a lower-cost area. Property taxes and homeowners’ insurance costs can be reduced.
- Consider debt management. Can you refinance a mortgage at a lower interest rate? Consider doing so if you will not incur high costs to refinance the mortgage.
- Contact a financial advisor at Kowal Investment Group. We’re here to help! If you have $750,000 or more in retirement assets, request an appointment or call the Kowal Investment Group at 262-522-4040. That’s how you can schedule your complimentary, no-obligation retirement review.
Any opinions are those of Kowal Investment Group and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
*High-yield bonds are not suitable for all investors. The risk of default may increase due to changes in the issuer’s credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of a portfolio. US Treasury securities are back by the full faith and credit of the United States government as to the timely payment of principal and interest.
