Yahoo Finance Retirement expert: Advice for saving for retirement in hard times
Finding the right retirement strategy can be difficult amid a volatile stock market and inflation. But there are ways to safely save, Senior Retirement Planner Ken Moraif, at the Retirement Planners of America, told Yahoo Finance Live (video above).
First, Moraif said that workers close to retirement should just diversify a small amount of their portfolios to maximize returns and reach their retirement goals.
“Risk control is incredibly important in our view. We have a philosophy that says you should only take as much risk as is necessary to accomplish your financial goals. Risk control is the number one thing to determine how much risk is appropriate for you and proceed accordingly," Moraif said.
In addition to risk control, recent legislation can help people keep their retirement accounts growing. That's because the SECURE Act 2.0 gives savers more time to take money out of their retirement accounts and accumulate savings for their future.
“SECURE Act 2.0 has basically given us some planning options...it used to be (that at age) 70 and 1/2 you had to take required minimum distributions. Then it became 72. Now it's 73. So you can actually grow your money within your IRAs for a longer period of time before you're required to take money out,” Moraif said.
Moraif added that even though many financial advisors say that people should start saving for retirement in their 20’s and 30’s, you can still reach you retirement goals by putting money in your 401k in your 50’s. That can still help people reach their retirement goals and reach what he calls the "magic number" people need to comfortably retire.
“There are some advantages in terms of being able to put more money into your 401(k) if you're over 50. So there are a lot of planning opportunities that (Congress has) created to help to build that retirement, to get to that point where you can retire with what we call your magic number,” Moraif said.
He also stressed the tax benefits of older workers contributing as much as they can to their retirement accounts so employers can match any contributions. The maximum 401k contribution for all workers in 2023 is $22,500. Workers that are over 50 can make catch-up contributions and put an extra $7,500 in their 401ks. If workers have an IRA, they can contribute an additional $1,000 to their retirement accounts.
“If you put more money into your 401(k), hopefully you get a match (from your employer), which is free money. You get a tax deduction, potentially, which is also a subsidy." In other words, added Moraif: "Put your retirement savings on steroids and (max) them out.”
Moraif also dispelled another common financial belief that workers should buy and hold stocks until they retire. He said that workers that are nearing retirement in five years and people that been retired for five years should sell investments when necessary as part of a risk management strategy.
“We believe that the philosophy of buy-and-hold is incomplete," Moraif said."You should have a sell strategy. Now, I know that sounds crazy because you've been raised to think that you should forever buy (stocks) and hold, but once you get in that decade, we think that protecting principal is very important.”
Ella Vincent is the personal finance reporter for Yahoo Money. Follow her on Twitter @bookgirlchicago
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