From: Sean Tang a/k/a Jushun Tang, Enrolled Agent
One of the biggest worries we’ve fielded from clients in the last three or four months has been the impact COVID has had on retirement savings.
A lot of people have lost money due to the volatility in the markets, but even more have been faced with dipping into retirement accounts to stay afloat as the pandemic has impacted their earning power.
We’ve given a LOT of advice, so I wanted to try to share a few ideas for staying on track – or getting back on it.
- First of all, if your 401(k) contributions aren’t maxed out, that’s an ideal place to start. Of course, maybe you need those funds more in your pocket than in your account, but the difference of only a few percent each week can add up considerably over the course of a year (or a career). Do the math and try to squeeze a bit more out.
- Convert to Roth structures! Frankly, there are simply too many advantages to Roth entities, and I’ve shared a lot of that over the last year or so. If you still have a traditional IRA, converting it to a Roth might prove to be a very smart choice, especially in light of the stock market dragging a bit these days.
- If, like many Americans, you took out a 401(k) loan – either for hardship or to purchase a home – then do everything you can to pay that off. While you “owe” that money, your ability to save is impacted, so the sooner you can make it work, the better you’ll be.
- One thing no one likes to discuss when “retirement” comes up is this: how long will you actually work? Years ago, 65 was the target age, but for white-collar jobs, it’s not surprising to expect workers and managers to be able to be productive well into their seventies. Getting clear on when you plan to retire can allow you to accurately engineer your contributions to hit your particular retirement goals.
- You probably won’t like this, but I’m going to say it: If you really want to “jumpo start” your retirement savings, you probably need to watch your spending. Do you need to lease the baddest car on the lot? Buy the biggest house in the neighborhood? There’s not a wrong answer there, but reallocating several thousand dollars each year from luxuries to retirement assets can literally be worth millions over the course of your lifetime.
- Lastly, don’t try to do it all yourself. You need professional advice, and having a relationship with a CPA (I happen to know one!), a financial advisor, and an attorney who can all understand your goals and offer advice – together – could give you real direction for retirement savings.
I hope this helps, because sooo many times, we hear from folks who have well defined goals, but simply don’t know how to reach them. If you’d like to discuss these ideas and more, feel free to reach out to the team and schedule a call to see if you’re getting the most from money.
Stay healthy and safe!