[singlepic id=3 w=150 h=150 float=left]Most people these days are questioning how they could have safeguarded themselves from the rapid decline of their 401ks.
You say I should have picked better funds and taken less risk with my Retirement Portfolio.
For those who are facing retirement soon all this discussion might not help you but for those who have many more years of planning for retirement listen up. You need to improve your investing strategies and you need to save more. You heard me correctly. SAVE MORE!
I know it is not what most of you thought but lets look at it from a logical point of view. You are worried that by saving more you are throwing money away especially in this downturn of the market. 36% of people over the age of 45 have stopped putting money into their 401K. (Source AARP) Well this is the wrong strategy. There is one way to avoid a market downturn and that is to have more money saved. Makes sense , right? That is the right strategy.
Why gamble that the stock market will produce double digit gains and lets make a retirement plan that will work for you.
If you have seen your account balances drop 20% then saving more can be added insurance.
Lets say you earn $100,000 and are at the age of 40. You also have $200,000 already saved. You would would a nice cool $2 million to play with at age 65. This assumes you will receive a 3% pay increase each year with a 10% contribution at a growth of 7%.
Then the unthinkable happens, your portfolio suffers a 20% loss. Your new retirement portfolio would now come to $1.6 million. That is considerable change in you annual income at retirement.
Now lets take those same numbers and assumption but this time you have been contributing 15% to your retirement. The market once again affects your account balance by 20% but now that you have been contributing 15% you will have close to 1.9 million at age 65. That number looks much nicer and healthier doesn’t it.
This is just one method of increasing your savings. Other include IRA‘s and tax-efficient funds in a taxable account. Just stay disciplined by having your company directly transfer cash from your checking account to the fund. It never hurts to save more into you Retirement Portfolio.
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