Five Tips to Level-Up Your Retirement Portfolio

October 27, 2020

If you are looking to boost your retirement, it doesn’t have to be complicated, nor do you need to start with a huge nest egg to end up with one! Read on for some insight and five simple tips you can begin to implement today. 

“When planning for retirement, it’s important to determine two factors early on: the age you ideally want to retire and how much you will need to live comfortably,” says Jill Erps, Chief Retail Officer at Financial Partners Credit Union. “With those two answers, an experienced retirement and investment professional can help you put together a plan.”


1. Utilize Your Employer's Company Match

Most companies offer a 401(k), a 403(b), or a 457 plan; these accounts are specifically designed for saving for retirement and are pre-tax contributions, and you typically can withdraw from them at 59 ½ years old. However, some companies provide a match for employee contributions; the match could be anywhere between 3 – 10 percent of your paycheck. If you utilize the match throughout your working life, your company is essentially giving you a bonus every year.


2. Automate Your Contributions

Get with your HR representative or use your credit union's bill pay program to send automatic contributions to your retirement accounts. If you can, the ideal amount to put towards your retirement savings each month is 15 percent of your income. Fifteen percent may seem like a lot, but one way to get there is to increase your contributions every time you get a raise. 

As of 2020, the contribution limit for employees to contribute to their 401(k), 403(b), most 457 plans, and if you are a federal employee, the federal government's Thrift Savings Plan has increased from $19,000 to $19,500. Those who are over 50, can use the catch-up contribution limit of $6,500. If you automate your contributions, they come directly from your paycheck or as an automated bill-pay function from your credit union. By automating the process, you are more likely to build up your retirement without the temptation of not transferring funds manually.    


3. Use Tax Loops to Your Advantage

Those who work as teachers, healthcare workers, public sector, or nonprofit employees have the chance to contribute more towards their retirement plans if they have a 403(b) or specific types of 457 retirement plans. Employees who have served 15 years, or more, can contribute more to their salary deferral plans. For 2020, the government also increased the annual additions for 403(b) plans to $57,000 for all employer contributions and employee elective deferrals.


4. Roll a Traditional IRA into a Roth IRA

Consider rolling your funds from a Traditional IRA into a Roth IRA. The main difference between a Traditional IRA and a Roth IRA is when you pay taxes on the funds. With traditional IRAs, you pay the taxes when you take the distribution at 59 ½ and older. With a Roth IRA, you pay the taxes now, and there are no additional taxes when you take the distribution. The money in a Roth IRA is allowed to grow tax-free, while with a Traditional IRA, taxes are paid on the amount that you invest, as well as all of the interest earned. Roth IRAs can be beneficial for those who plans to let their money sit in an IRA for five years or longer, or anyone who expects to be in a different tax bracket by the time they retire.


5. Consider Share Certificate Ladders

For those who are not ready to invest in IRAs with mutual funds or similar stock market-based retirement accounts, and want to have access to the funds regularly, you may want to consider Share Certificate that is also an IRA. You can typically work with your credit union to set this up.

Within your IRA, you can build a Share Certificate ladder. Say you have $12,000 to invest into your ladder, break that amount into four or more Share Certificates. Invest in the first Share Certificate for 12 months, then the next for 18 months, the following for 24 months, and the last for 36 months. Once the Share Certificates hit their maturity date, roll them back into another Share Certificate for another 36 months. You will do this with each Share Certificate as it matures, and you have the option of moving the interest with the Share Certificate or taking that off the top and then rolling the funds over. A Share Certificate ladder allows you access to the funds every six months to a year, so you are entirely in control.

“It’s important to work with an investment professional to plan your retirement savings and also evaluate your plan every few years to assess where you stand and where adjustments can be made,” Erps says. “Many members start out with more aggressive retirement investments when they are younger and then slowly shift to more conservative options as they approach their retirement age.”