Protecting Your Retirement Savings During a Recession

As you know, the year 2020 was difficult. During a turbulent economy, you might have questioned whether you were doing everything possible to keep your retirement savings safe. Perhaps that sparked something inside of you about how you would protect your money during a bona fide recession.

Fortunately, you can do five specific things to stay on track with your financial or retirement plan even when economic times are tough.

Don’t Leave the Market

During a recession, you might feel prompted to avoid the stock market. After all, there are always risks involved, especially during an economic downturn. However, a recession isn’t going to last forever. So, by staying in the market, you are very likely to reap the rewards later on when the market recovers.

Considering that people live longer today, that means they need income longer. To overcome inflation and benefit from financial growth, you want to keep investing your assets. As long as you have a solid financial plan in place, you’ll come out ahead.

A younger person might just ride out a recession while waiting for their portfolio to recover. In comparison, an older person who withdraws money regularly from savings will need a mix of assets and investments to stay untethered from the market.

Be Sure to Rebalance

While working, you can benefit from financial growth and safer assets that provide stability by having a mix of riskier assets in your portfolio. However, as you get closer to retiring, you’ll need to go with less risky options.

Not only do you want to set your asset allocation, but as you get closer to retiring, make sure to also regularly rebalance your investment portfolio. This is important since a long period of stock market returns can put you at greater risk.

For example, if your asset allocation is 80 percent stocks and 20 percent safe assets, years of growing in the stock market could turn that into a 90/10 scenario. In other words, if you have stocks that outgrow bonds, this would likely happen. 

By rebalancing, you can maintain the healthier 80/20 asset allocation. It’s simply not wise to take more risk than you need to when it comes to your financial plan.

Run Recession Scenarios On Your Plan

Everybody should understand the risk that their retirement portfolio contains. How will your portfolio do if we have another recession that is like the recession in 2008? 

What about the 2001 recession? Fortunately, there is a really comprehensive retirement tool made for consumers that allows you to do just that. The WealthTrace Planner is a retirement and financial planning application that allows you to choose which recession you want to mimic. 

You can run your entire retirement plan using a recession scenario to see how much you are impacted. It’s a great way to flesh out the risks you might be taking and if you are diversified enough.

Guarantee Some Retirement Income

Here’s another great way to come out of a recession unscathed. Utilize guaranteed income sources not affected by stock market volatility and accumulate a cash reserve. 

While you might experience a slight loss, it wouldn’t be anything near what you could lose by not taking the appropriate steps.

Stable sources of retirement income include things like pensions, Social Security benefits, and annuities. If you’re close to retiring, keep enough cash in a safe place like in a savings account at a reputable bank. 

You might also consider the cash value associated with a life insurance policy. If necessary, you could use that money as a reserve.

Don’t Forget to Diversify

An excellent way to reduce the risk of your portfolio caused by a recession is to diversify. That way, you can keep your investment portfolio from crashing no matter what’s going on with the economy. Now, if the market fluctuates, a portion of your portfolio could respond in a way that offsets any negative impacts. 

For example, bonds usually do well during recessions while stocks do not. This is what investment professionals call negative correlation and it is key to diversification.

You always want to have checks and balances built into your portfolio, especially during a recession. The key is to have a mix of investments, including stocks, bonds, and cash, as well as a mix within different sectors.

Potentially Rely on a Financial Advisor

When it comes to protecting your money, there’s no room for pride. Instead of assuming you have all the right answers, it might be better to talk to a financial advisor. 

Again, during a recession, you need expert advice and guidance. Based on your specific goals, an advisor will provide you with innovative strategies to achieve them.

The Bottom Line

Last year was a huge eye-opener for millions of people as to the importance of protecting their money and other assets. Although the pandemic was devastating and continues to cause problems, you can use it to understand why it’s so important to get help from your own retirement planning software or a financial advisor. 

With the right information, you’ll make sound decisions regardless of where you are in life or when you want to retire.

At Your 50s? Follow These Strategies to Save for Retirement

It is possible to build your retirement savings by following some proven strategies, even if you’re 50 or older. If you are worried about your financial future, it’s never too late to put together a solid financial strategy that aligns with your goals.

According to a 2019 survey of 2000 participants performed by GOBankingRates.com, 64% of those Americans expected to retire with less than $10,000 in their retirement savings account.

Don’t worry if you’re a part of this group. It’s never too late to start saving, even if you’re approaching retirement. According to retired certified financial planner Dick Bellmer, a former president of the National Association of Personal Financial Advisors, people should regularly review their retirement plan a minimum of every three years.

Let’s assume you’re reaching 50 and have yet to put anything aside for retirement. So, what are your options?

Here’s how you can begin your retirement savings plan.

Set up automated savings and improve budgeting strategy

First, evaluate your budget and remove any overspending costs to free up cash. According to Nadine Marie Burns, a CFP in Ann Arbor, Michigan, food is one area where many people waste money.

By creating meal plans, you may save over $100 each month from wasted or unused food.

Come up with a realistic savings goal and how much you can save automatically. If that’s too much to take in at once, focus on tiny modifications to your retirement plans over time.

George Gagliardi, a certified financial planner in Lexington, Massachusetts, suggested that you plan to live a long life and adjust your retirement income projections accordingly.

You have no influence over how long you live, but according to the Social Security Administration, the average 50-year-old man may expect to live another 30 years to 80.

On the other hand, a 50-year-old woman can expect to live for 33 years, to 83.

Maintain your investments

Set up automatic investments if you have a non-retirement portfolio or if you’re self-employed, managing your retirement fund. You will enjoy the benefits of dollar-cost averaging.

Regular investments can help you acquire more shares when stock prices fall and get fewer stocks when they are high.

As a bonus, you won’t have to remember to write a check each month.

According to Sandra Adams, a CFP in Southfield, Michigan, you also need a mix of different investments. Having investments of at least 60% in stocks will help you attain your objective over time.

However, don’t take too much of a chance when the market falls. Hopping in and out of the investment market might create severe problems in your plan, and you can’t manage those obstacles if you’re already behind schedule.

Pay off your debts

Do you have credit card debt, medical debt, or any other unsecured debts?

Pay them off as early as possible to free up money for savings. If you have a mortgage, create a plan to pay it off before you retire. Malcolm Ethridge, a CFP in Rockville, Maryland, suggested that removing housing expenses such as mortgage payments can lower the amount of annual expenses.

As a result, it will also reduce the amount of annual income you actually need to save for retirement.

Natalie Pine, a CFP in College Station, Texas, recommends avoiding future debt such as car loan debt. Instead, she recommends putting your income into a new account for buying a new car.

This will help you pay for a car in cash and spend less overall. Avoid taking out high-interest loans such as payday loans

Save for emergencies

Also, keep an emergency fund separate from your retirement savings to handle unexpected needs.

You can build one by putting money into it from bonuses or job promotions.

Consider insurance, especially disability insurance. It will be challenging to recover from any financial crisis if you can’t work anymore at 50 and haven’t saved.

Make absolutely sure you have sufficient home, auto, and umbrella coverage. Make sure you’re covered by health insurance.

Maximize your contributions if possible

According to James Shagawat, a CFP in Paramus, New Jersey, if your company offers a retirement plan, make sure you invest enough to receive the full match. If you’re 50 or older, you can contribute up to $26,000 annually.

You should also ask for any other retirement savings plans offered by your organization.

If your employer matches your contribution with offering corporate stocks, you may face “concentration risk.”

According to the Employee Benefit Research Institute research, 401(k) participants who receive corporate stocks as their employer match might end up investing more than half of their entire account balances in those stocks.

If this happens, if your organization performs poorly, it may impact your returns.

Contributions to a Roth IRA with diversified investments might help offset this issue.

Since Roth contributions are deposited with after-tax dollars, your withdrawals can’t be taxed once you reach retirement age.

If you’re 50 or older, you can contribute up to $7,000 every year. In 2021, if you’re single, eligibility will be phased out between $125,000 and $140,000 of your MAGI [modified adjusted gross income], and if you are married and filing jointly with your spouse, it will be $198,000 to $208,000.

Justin Meinhart, a CFP in Winston-Salem, North Carolina, suggests making these investments early in the tax year rather than waiting until the April 15 tax-filing deadline.

Work as long as possible

According to Sean Pearson, a CFP in Conshohocken, Pennsylvania, those days are gone when people used to retire at 60 or 62.

Now, people are working beyond the age of 60 or 65. They prefer investing their time in something less stressful than a high-stress job, which involves 40-to-50-hour work per week.

Following this strategy, people can continue to contribute to traditional IRAs even when they reach the 70s, as per the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019.

Work on side hustles or search for 'found money'

Do you still need more retirement income? Then look for a part-time job you’ll enjoy or sell items you don’t need at an auction.

According to CFP Benjamin Offit of Towson, Maryland, you might consider selling your property and downsizing or moving to a smaller area with lower housing rates.

Downsizing can result in significant savings that can be used for retirement.

Finally, Sarah Carlson, a CFP in Spokane, Washington, recommends checking your state’s lost asset site for any old accounts. If you’ve worked for other companies, you may have accounts that have been turned over to the state.

Look for these accounts and reconnect with them to collect the money you forgot to withdraw or have lost track of.

Open a Health Savings Account (HSA)

Before you retire, you need to consider how you will manage unforeseen medical bills. Large medical expenses can suddenly exhaust a lifetime’s worth of money.

According to a 2019 Fidelity Investments estimate, a couple in their mid-60s will need $285,000 in retirement to meet health care costs.

Apart from that, people reaching their 50s can’t ignore the exorbitant cost of long-term care in nursing homes. According to a Genworth research, the typical annual cost of a semi-private room in a nursing home in 2018 was $89,292.

Considering these facts, people must plan retirement after including future medical expenses.

Long-term health insurance is one option that covers extended medical care such as nursing and assisted living. If you meet the requirements, you should start a health savings account immediately.

Your taxable income will be reduced once you get this insurance. Your investments will grow tax-free. Once you reach the age of 65, you can withdraw funds without penalty or tax (it will be taxable if used for anything besides qualified medical expenses).

You should do some homework and choose the best features for you, such as low fees and low minimum balance requirements.

Boost your Social Security benefits

The earliest you can begin receiving Social Security benefits is at the age of 62. However, at age 50, it’s a good idea to start thinking about how you’ll collect benefits. You may estimate your benefits using this Social Security calculator.

According to experts, most people claim Social Security benefits too soon.

That’s so unwise. People can earn more from Social Security benefits if they postpone retirement.

According to Elijah Kovar, co-founder of Great Waters Financial in Minneapolis, taking Social Security at 70 instead of 62 increases your monthly payout by around 76%.

Waiting to receive Social Security is also a great idea to make more money if you’re married. The surviving spouse gets the bigger Social Security payout if one spouse outlives the other.

You’ll have a larger pot to draw in retirement if the primary breadwinner waits to claim benefits.

Your tax situation is another crucial factor to consider while taking Social Security benefits. It’s the best source of income we have outside of Roth IRAs, from a tax point of view.

Implementing techniques that reduce taxable income, such as donation, charity, etc., can help you maximize your Social Security income.

Use income from traditional pensions

If you get a defined-benefit pension plan through your current or past employer, you should receive an individual benefit statement once every three years.

Once a year, you can also ask for a copy of the statement from your plan’s administrator. The statement should indicate the advantages you’ve gained as well as when they’ll become fully available to you.

It’s also a good idea to understand how your retirement benefits are calculated. Many programs use formulas depending on your income and years of service.

So, you might be able to make more money by working longer.

Don't ignore taxes

Finally, keep in mind that not all the money you save for retirement is yours to enjoy.

When you take money out of a regular 401(k) or traditional IRA, the IRS taxes you at your ordinary income rate.

So, if you’re in the 22 percent tax bracket, each $1,000 you take will only bring you $780.

So you must plan ahead to keep as much of your retirement money as possible. Relocating to a tax-friendly state might be a wise option.

Author Bio: Lyle David Solomon is a licensed attorney in California. He has been affiliated with law firms in California, Nevada, and Arizona since 1991. As the principal attorney of Oak View Law Group, he gives advice and writes articles to help people solve their debt problems.

5 of the Best States for Seniors to Retire to This Year

Hopefully, retirement brings a slower, easier, and more stress-free lifestyle. However, much of that depends on where you live. Here are five of the top states to retire. Some of the choices might surprise you, but they all have a low cost of living and a laid-back lifestyle.

Georgia

Hands down, experts rate the Peach State as the best place to retire in the United States. Not only can retirees enjoy a varied, four seasons landscape, but Georgia real estate is priced right. 

The Atlanta area median home price was just a little over $279,000 during the first part of 2021. That's $40,000 less than the national average. Georgia real estate prices are not the only thing that makes this state attractive; overall, the state has a low cost of living as well as low taxes. 

You can talk to a real estate company, like The Georgia Club Realty, about finding a home to retire to in Georgia.

Florida

It's no surprise that Florida is a great place to retire. The warm, tropical weather and endless beaches are a big plus. However, best of all, the Sunshine State does not have a state income tax, and it doesn't tax social security benefits or retirement income either. 

Furthermore, Florida doesn't have an inheritance or estate taxes. Finally, real estate and property taxes are reasonable. If you want to save some serious money during retirement, look to Florida.

Tennessee

With its mild climate and stunning landscapes, the Volunteer State has much to offer. Tennessee has the fifth-lowest cost of living in the country, around 10% below the national average. 

Add in the world-famous music venues, the numerous state parks, and its deep sense of history, Tennessee is the place to be.

Missouri

Surprisingly, the Show-Me State made the experts' top five states to retire in. Its low cost of living makes this state in the American heartland a good place to retire. 

Tax rates are reasonably low, and Missouri's natural beauty might surprise you. If you opt for small-town life, the big cities of St. Louis and Kansas City are not far away when you need them.

Massachusetts

Experts rate the Bay State at #5 mostly due to its wellness score. If you are dependent on healthcare, Massachusetts is home to some of the leading research hospitals in the world. While the cost of living is high, Massachusetts is known for its cosmopolitan and diverse culture.

While these five states are ranked highly by experts, you might find another state to call home in your golden years. When you are ready to retire, do your own research.

4 Ways to Make Your Home Stand Out Among Others if You Want a Quick Sale

If you want to sell your home quickly, making it stand out from the crowd should be a top priority. For one, remember to keep it tidy and clean. Another thing you can do is get rid of pet odor and fur. Consider a few more ways to make your home stand out.

Remove Clutter

While it can be a chore to remove clutter, you'll still have competition from those who've cleaned up more than you. In fact, excessive clutter can make your house appear dirty to buyers. 

Instead of moving it to the basement or attic where a buyer might see it, consider placing anything you won't be using in a storage unit for safekeeping.

Improve the Landscape

You can start making your landscape look more appealing by pulling weeds from driveway cracks, and flower beds, and raking leaves. 

Secondly, try placing potted plants near the front door and planting brightly colored flowers to add pops of color. Trimming shrubs and hedges, and pruning trees can give your home's exterior a crisp appearance. 

Another idea is to add fresh mulch around trees and plants. Finally, give your home a finishing touch by mowing the lawn.

Use the Right Paint

First impressions can be everything, especially in real estate. For instance, if a potential buyer sees how weather-beaten your house is, they'll likely head the other way. 

Fortunately, you can use paint to cover up many flaws such as mold. 

In addition, if they see a paint color that doesn't quite fit their expectations, they might decide against your home. For example, white is a safe option when choosing paint colors.

Polish It Up

It's often the little things that matter and real estate is no different. For instance, you might have a broken bathroom doorknob, dead lawn grass spots, or cracked kitchen tile. 

All of these details can be unsightly to anyone who's looking to spend their hard-earned money on a new house. Beforehand, try walking around to find any flaws you can fix. 

Buyers want to see a tidy house they can turn into a home that's personal to them.

Although you've likely spent years creating the cracks in the walls, little things matter. After all, potential buyers can and will notice anything that looks out of place. 

This could mean you may not be selling your home anytime soon. On the bright side, with a bit of fixing up, your house can look like new again.

Lease vs Buying a Tesla - Which Option Will Help You Get the Best Deal?

Because there are now more Tesla's on the road today, there are also many more used Tesla's available for people to purchase. With vehicles becoming more and more common to buy, there are obvious benefits to purchasing a used Tesla. There are also some reasons why people may want to avoid it and buy new or lease. 

Buy a Tesla

Some may see the purchase of a used Tesla as a risk or that it is not the best option for someone who has trouble getting along financially. While the purchase price may be lower, the repairs that have been performed on the used Tesla may not be as good as the new vehicle. 

There are also other reasons as well. When you are shopping for a Tesla to purchase, you must be thorough when searching. Look at the vehicles in your area, in your state and region, so you are sure to get the most for your money.

Start Your Search

Before you do some serious shopping, look at Tesla.com, you should search their lists of new and used Teslas that have to sell. The vehicles they offer may be the best for someone looking for a used Tesla, and the prices they offer will be lower than Teslas. 

Buy a Tesla

Second, get some quotes on used car websites like Carmax.com, Carvana.com, and UsedCars.com. These cars are in high demand, so when the market is heating up, you may be able to get a better price at these other sites. 

After getting the quotes, you have to decide if you want to buy it or lease it. You have to understand if you will still need the car at the end of the lease period. 

Tesla does not allow you to buy the car at the end of your lease period. They want your car for the autonomous taxi fleet that they plan. So buying the car is your only option if you want to keep it permanently.

After calculating the numbers for both purchases and leases, the lease is better if you do not need the car at the end of the period. A lease is better than a one-time purchase in most situations because, at the end of the lease period, you are free to do whatever you want.

What to Consider Financially Before Buying Your First Home

When you're ready to buy a home, you are probably excited about finding the right location and the best home in your price range. But be sure to consider other financial aspects of your purchase before making an offer on the home of your dreams.

Additional Purchase Costs

In planning for your home purchase, be sure to factor in the realtor fees and closing costs. These will be explained when you are ready to make an offer on a property, but you will want to have extra cash available. 

Inspection fees and maintenance costs for issues like termites or leaks should also be kept in mind. Sometimes these expenses are negotiable with the seller, but it is a good idea to set aside some additional funds for unexpected surprises.

Moving Expenses

Hiring professional movers can be expensive, although it is often unavoidable and usually best for your furnishings. You don't want to take chances with a pricy piano or a newer entertainment center and speakers. 

Expert movers will make sure that everything is wrapped or packed carefully to avoid nicks or breakage. You may also want to pay extra for moving insurance as well as additional costs for any special items as determined by the moving company. 

These might include costly china or a movable hot tub. Keep some funds handy for takeout meals and packing materials on or near the day of the move.

Taxes, Insurance, and Utilities

The taxes and insurance are probably factored into your anticipated closing costs, but check to be sure. You may need to increase your current insurance coverage on the property if you are bringing more expensive furnishings or upgrading the property in certain ways. 

Such as installing new fixtures or improving the landscape. Utility deposits may be required when the heating, electric, and water bills are switched to your name.

Funding Sources

Start thinking about your financial options before you decide which home to buy. Professional lenders like Precision Capital - Your Private Money Source will discuss your home purchase expenses ahead of time to help you prepare. 

You may be able to set up a savings account or an investment plan that will ensure the needed funds are available when you buy a house. You might prefer to take a loan to cover the upfront costs of your housing purchase.

Prepare financially in advance to have money available when you find a house to buy. Getting ready now will save time and stress later.