Strategies for Protecting Your Retirement Plan

The cost of gas, groceries, and other necessities continue to burden our budgets. Many are faced with the decision of going back to work or delaying their retirement due to rising costs. Having an investment strategy to help manage your income and expenses can be beneficial to protecting your retirement plan and navigating the current economic climate. Take a few minutes to read about some high-level concepts that will help you be better prepared.

Have a Good Handle on Your Expenses

You need to have a good handle on your expenses to have a good retirement plan in place. With the inflationary environment we have today, things are going to get more expensive. Considering this, many are putting budgets in place for the first time or re-evaluating old ones. It is also important to be sensitive to rising interest rates which are impacting personal credit cards and home equity lines of credit as well.

Pay Off High Interest Debt

If you are carrying credit card debt for any reason, it might be worth a second look. Getting a game plan together and paying down debt is a priority when interest rates increase. On the back end, those APR rates could surprise you month to month. Some credit cards and other variable rates have increased several percentage points in the past year.

If your interest rates have increased significantly, you might consider taking money from your savings to pay off any high interest debt. Even though inflation is at a 40-year high, your savings rate could still be hovering around 1%. Paying off high interest debt with money that’s sitting in savings could put money back into your pocket and help lower your monthly bills as debt decreases.

Having a Retirement Plan that Coordinates Expenses and Income Sources

When creating a retirement plan, it is important to identify what your expenses and income sources will be once you retire. Do you have a pension plan? Should you take Social Security sooner? What forms of diversified income sources can be created from your 401(k)?

A lot of people during their working years were chasing capital appreciation. They were chasing gains in the market. Right now, that has taken a hit. Can you shift gears and reallocate those funds to start creating income as you move into retirement? You want to have an income stream that makes you feel more comfortable and have that anxiety lifted off your shoulders.

Consider Annuities as an Income Option

Considering an annuity as an income option could provide you with a bit more financial security, especially as interest rates have increased. Annuities can help supplement things such as Social Security or may provide you with enough additional income that you can enjoy retirement. Also with higher interest rates, you may be able to increase your income as a percentage of withdrawal from this strategy and some even have increases in payments to help fight inflation in the future.

Utilize Your Health Savings Account

If your employer offers a qualifying health insurance plan, take advantage of the pre-tax benefits of a Health Savings Account.

As a family, you can maximize your HSA contributions, up to $7,300 per year which are pre-tax dollars. That’s going to roll over year to year and be free to use for qualified medical expenses. By the time you retire, you could have a little nest egg built up that you can use for things like Medicare Part B premiums, prescription plans, and other medical expenses.

Work with a Financial Planner

If you’re thinking about a retirement plan, it would be wise to talk with someone professionally who could provide an outline of what your plan might look like. A financial planner will help you create a budget, prioritize debt repayments, navigate healthcare options, and set targeted financial goals.

At Financial Dynamics, we offer a suite of financial and lifestyle management services that can be customized to help you create your retirement plan. Our advisory team is committed to helping you make informed decisions about your money so you can move closer to achieving your financial and lifestyle goals for retirement.

Advisory services offered through J.W. Cole Advisors, Inc. (“JWCA”). Financial Dynamics & Associates, Inc. and JWCA are unaffiliated entities.