Check these opportunities to withstand the market crash.
2020 was a lot, and some of the bad things have rolled over to 2021. The pandemic highlighted the grave issues Americans face with managing money. Financial experts prefer traditional money management techniques for stable growth after a year-long battle with the virus.
The new decade calls for new strategies to protect, grow, and contribute to your health and retirement funds. An MIT AgeLab study revealed that, on average, Americans live 22 years in retirement. Experts from Fidelity Investments believe that you need at least half a million dollars to pay for medical bills, long-term care, and household expenses. The journey can be slow and bumpy, but it will be worth it if you are patient and make educated financial decisions during your working years.
Here are four retirement resolutions for 2021 that can allow you to retire peacefully with enough money.
Create a Retirement Plan
“The first thing you want to do is have a retirement plan,” says Brian Decker, a financial advisor and founder of Decker Retirement Planning. Creating a retirement plan that will cover significant life events and your retirement goals while protecting your money from market fluctuations might need some expertise.
Analysts noticed that DIY investing has been surging as Americans flocked to invest in stocks and real estate during the pandemic. The good news is that we are learning about finance to find multiple avenues of low-risk investments, passive incomes, and high-yield retirement options. The bad news is that managing your life savings without sound knowledge of the market trends can prove to be catastrophic.
If you don’t know how much you’ll need in retirement, the risks you can afford, or the best funds to pick; tech can help you connect with a fiduciary advisor in minutes. You can try the Internet’s most-used financial technology website, SmartAsset, to start looking for fiduciary advisors. Founded by Princeton Grad Michael Carvin, SmartAsset has raised over $51 million and revolutionized the $27 trillion retirement industry. Their concierge team will connect you with up to three nearby vetted fiduciary advisors after you fill in a brief questionnaire.
Unlike financial advisors who follow suitability standards, fiduciary advisors are bound by law to work in your best interests. It is crucial to choose the right fiduciary advisor; ending up with the wrong one might cost you a happy retirement.
Make the Most of Your 401(k)
401(k) is one of the most significant employee-sponsored funds for retirees in the US. Most people understand the basics, like how it forms the foundation of retirement planning, tax benefits, and penalty-free withdrawal just at 59 ½ years of age. However, they seldom understand how employers choose to invest their salaries, assuming that it must be for the best. Sadly, this isn’t always the case.
Due to poor understanding of employee-matching schemes, you could be losing out on “hidden money”. It’s not rocket science. Let’s understand how much money you could add to your nest.
Your employer matches a percentage of your annual income to your 401(k) contributions. If you earn $80,000 every year and your employer offers 100% matching up to 2% of your annual income, your employer adds $1,600 to your 401(k) in that year. Subsequently, you’ll have to contribute to the highest possible cent per dollar to make this happen. Since all contributions are tax-free, this is smart money that could end up being a lot when compounded over decades.
That’s not the only place you could be losing money. Did you ever wonder if the 401(k) mutual funds selected by your employer are actually right for you? Employers follow a default function for all employees unless, of course, you want to take control of your own finances. Apart from the fact that these mutual funds might not align with your risk appetite, you could end up paying high investment fees that grow with your money.
You might be able to match your contributions to the highest cent, but picking the right funds can be tricky. Again, this is where a fiduciary advisor can help. The right advisor will know the best funds for you because they understand your long-term goals and current financial stature.
Clear Your Debt Now
With health expenses and job losses reaching a record-high last year, a lot of people are currently in debt. During a time when Americans hold an average credit card balances of over $5,000 and over 40% of older workers are retiring with massive mortgage debt, a happy retirement sounds like a far-fetched dream.
Debt can stay with you for life and even beyond, rolling over to your family members if you die and dragging your family’s life aspirations. So before you think about increasing your retirement contributions, it might help to pay off all of your dues first.
Why do credit card debts last for years in the first place? Simple: the exorbitant interest rates and late fees for missed payments. If you are stuck with monthly minimum payments, you might be able to save tons of money by consolidating your debts at low-interest rates.
If you have a FICO credit score above 650, you might be able to get a line of credit from Tally with APRs as low as 7.9%. How does that work? When your line of credit is approved, Tally will start repaying your debt using the Avalanche method. Their AI bots will prioritize high APR credit card balances while making minimum payments for low APR cards. Simply put, you make a single low-interest payment to Tally every month (saving money immediately), and they’ll make sure you are on track to clearing your debt at the earliest. The best part is that if you miss the deadline, Tally will pay credit card issuers on your behalf so that your credit rep stays intact.
Keep Emotions and Money Separate
The truth is money holds emotional value. Often, investors and individuals panic when the market looks down on them. This can trigger irrational behavior that usually has a poor outcome. Investing in and out of the market or withdrawing from your 401(k) since it’s penalty-free during the pandemic has caused irreversible damage to the retirement dream of millions.
It is natural to panic when your assets tank with market downturns, but staying patient until the market auto-corrects is not everyone’s cup of tea.
For instance, if you bought Tesla stocks when it was soaring above $2,000, you must have felt like cashing out when it fell and stayed at $400 for a while. Now, you certainly have some renewed hope as Tesla shares skyrocketed past $800 and Elon Musk took the official title of the richest man in the world.
Retirement planning is for the long haul. You don’t lose money if you don’t sell. Those who work with an in-house fiduciary advisor are often able to refrain from making emotionally-triggered financial mistakes. This is possibly the best way to avoid regrettable money moves. Though Robo-advisors have scaled massively due to lucrative features, guided portfolios, and virtual access to financial advisors, they are well-suited for small to medium-sized portfolios.