Maximizing Your 401(k)

401(k) plans, whether company-sponsored or not, can be great vehicles for retirement saving. Maximize this account with a few simple steps.

  • Get Growing – Many people can’t start contributing the maximum amount right away. To get to the maximum contribution, individuals should up their contributions by one percent each year. This is an amount that can be scheduled into the budget, but doesn’t break the bank.
  • Maximize Bonus Checks – Instead of using that annual bonus to buy something fun, live off of it for the month. That way investors can use their regular paychecks to max out their 401(k) accounts. It isn’t as glamorous, but will help out in the future.
  • Remember the 401(k) – When moving over to a new job, investors should make sure they take their 401(k) with them. After years of contributing, it would be a waste to leave that money sit.
  • Plan for Emergencies – Always make sure to have a separate emergency fund. Those who don’t set one up ultimately have to take money out of their retirement funds for emergency situations, cheating themselves out of money later.
  • Minimize Withdrawals – After retiring, investors should be careful not to withdraw a high percentage of their 40(k) a year. That money needs to last quite a few years. However, if investors have other investments such as real estate that bring in an income, they could withdraw more per year.

Being aware of how much money they are putting in and trying to make it last can help investors maximize their 401(k) account. Consider transferring to or opening a self-directed 401(k) with Mountain West IRA.

Retirement Saving as a Small Business Owner

Small business owners are in a different boat when it comes to saving for retirement. Unlike their employees, business owners don’t just check a box once to keep taking money out of their paycheck each payday. This means they have to be even more disciplined when it comes to saving money. They don’t have the luxury of not thinking about it.
To stay disciplined, many business owners have found setting a goal to challenge themselves can encourage them to set a certain amount aside each month. Goals are good motivators and increasing those goals every couple of months could help set aside a decent amount for retirement.
Treating saving for retirement like a bill, is another trick used by many successful small business owners to consistently save each month. A self directed SEP IRA account can be the perfect vehicle for business owners to use when saving for retirement.
Business owners who have a flexible income often find deciding on a percentage of their income rather than a fixed amount can be a more practical approach. Also, taking small steps into saving can help. Instead of planning on a huge percentage if it isn’t practical at the time, start small and build up.
The individuals at Mountain West IRA can help small business owners set up a retirement plan to help them successfully save. They offer many options and can help determine which retirement program will best fit the situation.

Working After Retirement

Some retirees find fulfillment in continuing to work after retirement. And it might not be such a bad idea to consider working part time after you decide to retire. There are numerous benefits that can come from it.

If you aren’t comfortable with where your retirement savings are sitting, part-time work could be a good option for you. Hopefully you set up some type of retirement plan whether it be a self-directed IRA or 401(k), but if not, you could be in the same boat as a lot of households between the ages of 55 and 64 that only have $12,000 in retirement assets. Continuing to work could help increase your nest egg and make retirement a bit more comfortable.

Do you currently have a mortgage? Almost half of homeowners age 62 and older have a mortgage. If you have to withdraw from your retirement account to pay off your mortgage, you’ll have to pay more taxes on your retirement distributions. Finding part-time work to pay off the mortgage will reduce your cost of living during retirement.

Sometimes you can be lucky enough to find a part-time job with health care coverage, which can help cover your health care costs. Medicare kicks in at 65, but if you decide to retire before you reach that age, you’re on your own. Setting up a Health Savings Account is another way to help take care of health care costs.

For decades, your purpose in life was your career. It can be daunting leaving that behind and trying to find a new purpose. Working-part-time can help ease that transition while helping to fill your days and bank account. Along with giving you a purpose, continuing to work can help keep you in shape physically and mentally.

Downsizing during Retirement

A lot of people go through a downsizing period when retiring. Downsizing can include your living space, family heirlooms and other items. Something to keep in mind when downsizing is to focus on how each of these things will serve you in the future and not the importance they had for you in the past.

Living space is a primary area for downsizing during retirement. A house with multiple bedrooms and levels is great for a growing family, but not so much for a couple or individual. That much space isn’t needed and stairs may no longer be a viable option. Downsizing to a smaller house, condo or retirement home can be a great idea.
Location also plays a factor. Living farther out of town can become a hassle especially if driving abilities become limited. Moving closer to the center of town also saves on gas, leaving more money available to spend on fun activities. Depending on your retirement budget, you could also consider moving to a new town, state or even country. This can cut down on costs depending on the location you choose. There are many areas that are considered great locations for retirees. They are often in warmer parts of the U.S., with lower costs of living and an abundance of activities.

We have a tendency to accumulate stuff throughout our years and are reluctant to let it go. Some of these things are family heirlooms and can be relinquished to family members now instead of waiting. If they just take up room, it might be time to hand them down so someone new can appreciate them. One way to do this is to let your children or relatives decide what they would like. Give them sticky notes and let them go through what you’re wanting to pass down.
Go through the random stuff you’ve accumulated. If it doesn’t serve a purpose in this new phase of your life it can probably be let go. Donate these items to charity or hold a yard sale to make a little extra cash.

The term downsizing can be daunting and cast a bad light. But with retirement it really means having time to sort through your life, mentally and physically, and deciding what will suit you during the next phase of your life.

What Type of Investor Are You?

Each generation faces differing events and challenges that impact their investment strategies. Which type of investor are you?

The Traditionalist Generation (1925-1945):

Defining events: The Great Depression, lunar landing, WW I & II, Korean War, Peace Corp, McCarthyism, JFK assassination, Martin Luther King Jr. assassination

Traditionalists are generally a financially conservative generation. In fact, 49% of Traditionalists have more conservative risk tolerances, while only 10% are more aggressive investors. Traditionalists experienced employment stability, pension plans, and assured social security, leading to over half of Traditionalists with assets in annuities, and 87% with savings, investments or insurance to provide additional retirement income.

The Baby Boomer Generation (1946-1964):

Defining events: Watergate, Vietnam, women’s liberation and feminism, Roe v Wade, Civil Rights Movement, selective service

Boomers balance the liberalism of their youth with conservatism from age and years of family demands. 41% of Boomers have more conservative risk tolerances while 16% are more aggressive. While Boomers hope to receive retirement assets from employer-sponsored plans these plans are disappearing, leaving many late to realize the necessity of investing. They are currently facing the unique position of allocating unexpected income (parents’ trusts, real estate and other assets) while aiding the financial needs of their children. This has lead them to look toward longer-term income-producing investments with low volatility.

Generation X (1965-1980):

Defining events: Challenger explosion, “Black Monday,” Cold War, fall of the Berlin Wall, end of apartheid in South Africa, sale of the first Macintosh computers, rise of the AIDs epidemic, the Internet

Generation X witnessed the rise of technology, making them more entrepreneurial, independent, and goal-oriented. 23% of Generation X exhibit more conservative risk tolerance, while 31% are more aggressive. They started careers as cutbacks began on pensions and healthcare benefits. Additionally, nearly 30% of people in their 30s and 40s (includes early Millennials), still possess outstanding school debts. After paying debts, Generation X places priority on saving for housing and children rather than retirement. They view themselves as permanently on the cusp of financial disaster, minimizing their investments.

Millennials (1981-2000):

Defining events: Desert Storm, Iraq War, 9/11, Oklahoma City Bombings, Global Financial Crisis and Great Recession, social media, schoolyard violence, environmental impact awareness, Googling, multiculturalism.

Millennials witnessed an economic collapse, often referred to as “the Second Great Depression.” This impacts their investment decisions. In fact, 59% of Millennial investors say avoiding risk is their top priority. Investors, however, are few. With 37% of 18 to 29 year olds unemployed, 44% of recent college graduates underemployed (part time or in jobs that require no degree), and the highest student loan debt in history, Millennials are slow to invest.  Those who are investing, however, ensure that their investments are aligned with their philanthropic interests. In fact, Millennials ranked “social responsibility” in their investments higher than any other generation.

Which of these categories describes your investment style? The beauty of a self-directed IRA is the flexibility to manage your own investments. This allows you to match your investment risk comfort with your investments based on your own knowledge of investment. Contact Mountain West IRA to learn more about self-directed IRAs.

Need Some Inspiration to Save for Retirement?

Coin Dropping Into Piggy BankProject your retirement income! By taking a look at your current nest egg and estimating the amount you will have available when you are ready to retire, you can identify any potential shortcomings. Take the estimate a step further and determine the approximate annual income produced by your savings.

Most Americans discover they are not putting enough savings aside for retirement. Others are betting on the stock market, hoping their mutual fund manager will make good choices. Did you know there are other options? With a self-directed IRA you can take control of your retirement investments and the investment choices are nearly unlimited. Want to invest in gold or other precious metals? How about that investment real estate you’ve always dreamed of owning or a start-up business you heard about and want to include in your investment portfolio?

While the representatives from Mountain West IRA do not offer investment advice, they are available to clarify the IRA guidelines, assist in selecting the “best fit” IRA program and educate clients to avoid costly IRS penalties.