Your golden years should be lived on your terms.
You'll need to meet your financial goals to achieve the life you want once you retire. Although achieving retirement goals is more challenging than in previous generations, you can bolster your nest egg with a diverse range of traditional and not-so-traditional strategies.
From mutual funds and bonds to crypto-based retirement accounts, you’re about to learn how to cross the finish line with enough savings to live comfortably during your retirement.
Why you need to set goals for your retirement
Although it’s not the most romantic topic to think about, retirement is a crucial aspect of your life that needs to be prepared for.
Whether you retire at 65 or 75, you’ll need enough money to live on once the salary stops flowing. Forgoing a solid retirement savings plan may significantly impact your lifestyle — specifically by limiting your budget for groceries, vacations, rent, and healthcare.
From the high probability of health-related problems to decreased chances of employment, seniors and golden-agers don’t have the same accessibility and opportunity as their younger selves.
Therefore, the best time to plan and achieve your retirement goals is now.
How much money do you need to retire comfortably?
The current life expectancy in the United States is 79 years.
With that in mind, how much money will you need to save to live comfortably from the age of 65 until your death? You’ve likely searched for the golden number regarding retirement savings; however, the truth is that everyone’s needs are different.
Many financial specialists cite $2 million as the golden retirement figure, but there’s a better way to determine your nest egg according to specific factors, such as:
- Your current spending habits
- Your current health outlook
- The APY on your savings account
- The age you retire
- Your income from other sources, such as real estate, social security, pension, and investments
Once you’ve considered all these factors, multiply your pre-retirement income by 10 to determine how much money you need to save.
Another option is Bill Bengen’s 4% rule. The 4% rule determined that retirees should save enough that allows them to withdraw 4% from their savings portfolio each year.
For example, saving $1,000,000 will allow retirees to spend $40,000 per year for 25 years. However, Bengen’s 4% rule has been revised to the 4.5% rule to consider inflation.
Traditional tools to achieve your retirement goals
If you’re ready to take your retirement goals seriously without rocking the boat — here’s a list of the most popular (and traditional) savings and investment methods to meet your retirement goals.
Save early — save often
One of the most basic but valuable methods to get your retirement savings on track is to save early and often.
Although inflation makes this method more challenging, it still provides serious savings when implemented in your early twenties. If you’re just getting started — don’t be discouraged!
The rule of thumb is to save roughly 20% of your monthly paycheck. Depending on your lifestyle, you can increase the percentage of your salary towards savings and forgo a few personal luxuries.
High-yield savings accounts
You want savings to work while waiting for your retirement.
In other words, your money should accrue value while sitting in a savings account. One of the low-risk methods is placing your money into a high-yield savings account.
High-yield savings accounts typically top out at 3% APY and average around the 2% APY range. Therefore, high-yield savings accounts require substantial savings and decades to accrue value.
Traditional IRA and Roth IRA
Another popular option to feather your nest egg is with a traditional IRA or Roth IRA.
Financial institutions offer individual retirement accounts (IRA) and provide tax-deferred or tax-free growth benefits. Traditional IRAs allow you to deduct contributions on your tax return and potentially find yourself in a lower tax bracket once you’re ready to withdraw.
Contributions to Roth IRAs are made with after-tax money — meaning your account can grow tax-free and will not incur taxes once you’re ready to withdraw.
Traditional 401(k) and Roth 401(k)
Next in the long line of traditional retirement methods is the 401(k) and Roth 401(k).
Unlike IRAs, traditional 401(k) and Roth 401(k) are employer-sponsored investment accounts. 401(k) retirement plans offer tax-based benefits, such as tax-deferred contributions or tax-free growth potential.
Many 401(k) plans offer employer-match benefits, where employers match your monthly contribution amount.
Stocks are appealing for your retirement account because of their generally upward trend.
Although the stock market has experienced its fair share of crashes — it has generated an average of 10% annualized returns since 1926. The general rule of thumb is to invest 10-12% of your annual income into stocks to ensure a diversified and relatively stable retirement portfolio.
Bonds are considered a safe bet because they move far slower than stocks.
Bonds, such as treasury and corporate bonds, are fixed-income tools that provide predetermined interest rates over a specific period. However, bonds have become far less lucrative with the rise of inflation and lowered interest rates.
In any case, most financial advisors recommend using bonds to balance your retirement portfolio.
Funds, such as mutual funds and ETFs, are financial vehicles that spread investments across a range of stocks, bonds, or other money-market tools.
ETFs (exchange-traded funds) are passive investments, while fund managers actively manage mutual funds. By investing in funds, your retirement portfolio will have exposure across a wide range of securities.
Commodities are raw materials typically divided between three categories: energy, metals, and agriculture.
When it comes to achieving your retirement goals, gold is a popular addition to your portfolio due to its ability to resist inflation. Therefore, gold is often viewed as a hedge during market turmoil, making it a small but necessary piece of the retirement portfolio puzzle.
Meet your retirement goals with cryptocurrencies
The growing chorus of leading financial institutions offering cryptocurrencies has given rise to a new trend — crypto-based retirement and investment accounts.
Popular cryptocurrencies, such as Bitcoin and Ethereum, offer a diversified solution to the hodge-podge mixture of stocks, bonds, and commodities. Although crypto is viewed as an emerging asset class aimed at young Americans — seniors and golden-agers finally have a chance to add top cryptocurrencies to their retirement portfolio easily.
How much money should you invest in crypto for retirement?
Although savvy crypto investors allocate significant portions of their capital towards cryptocurrencies — beginners should allocate no more than 5-10% of their portfolio.
The crypto market’s macro trend is green; however, pullbacks make crypto a risk-on investment. By keeping a well-diversified portfolio, crypto can produce stunning rewards as a long-term investment.
For example, Bitcoin’s price hovered in the $5,000 range in March 2020 and peaked at $69,000 in November 2021. These figures are not only a testament to the crypto market’s volatility but to the financial possibilities that lie ahead for prospective retirees.
Achieve your retirement goals with a crypto investment advisor
Contact a crypto investment advisor if you’re ready to add popular cryptocurrencies, such as Bitcoin or Ethereum, to your retirement portfolio.
Buying and storing cryptocurrencies on your own still feels like the wild west, and crypto-based 401(k) plans are few and far between. Instead of learning an entirely new market, SEC-registered crypto investment advisors can help you jump-start your crypto retirement account.
Automated crypto investment advisors work with you to tailor-fit your crypto portfolio by discussing your financial goals, risk tolerance, and more. You can watch your crypto portfolio grow over the years and withdraw anytime, making crypto investment advisors the most recommended way to push your retirement account to new heights and achieve your financial goals.
Shrimpy is providing an endorsement of Shrimpy Advisory. Shrimpy and Shrimpy Advisory are affiliated companies. A conflict of interest exists because Shrimpy Advisory will be compensated if a client utilizes Shrimpy Advisory’s services.