How To Protect Your Retirement Savings


Hire An Experienced Attorney

How to Protect Your Retirement Savings

It is essential to work with an attorney who understands how divorcing your spouse affects retirement funds. There are just too many unique considerations to navigate the legal system yourself.

For example, pensions and retirement accounts involve a third-party administrator, unlike other types of community property. Your plan administrator is required by law to distribute payments to you in accordance with the terms of the plan.

If this involves making payments to your ex-spouse, the plan administrator needs a qualified domestic relations order but this is complicated to obtain. Also, several state government plans such as the California Public Employees Retirement System , California State Teachers Retirement System and Civil Service Retirement System require a QDRO.

A skilled attorney will be able to advise you on dissolution and mediation options and help you understand how to protect your retirement savings during a divorce with a qualified domestic relations order.

Take Advantage Of Reduced Spending To Boost Savings

On the flip side, if youre spending less now that you cant go out or travel as a result of social distancing recommendations, you could boost the amount youre saving. If you do have debt, focus on paying that down. Otherwise, give your emergency fund a boost and increase your retirement savings rate.

How You Can Offset Price Increases

Its hard to outpace these escalating costs with conventional retirement benefits. While Social Security payments are linked to the Consumer Price Index, the cost-of-living adjustment is partly eaten up by increases in those Medicare premiums and other medical expenses. So its difficult to keep up with the real cost of health care in retirement unless you plan ahead.

Youve heard it before, youll hear it again. Maximize Social Security benefits through delayed retirement credits. That means waiting as long as possible ideally, until age 70 before you draw benefits. Your monthly payments will be higher and then augmented by annual cost-of-living percentage adjustments when you do start receiving checks.

Optimizing Social Security benefits is so important for everyone, Ms. Cheng, the financial planner, said. For married couples, this also means locking in the largest survivor benefit. She explained why: My parents are 14 years apart. My dad deferred his benefit until age 70. He earned delayed retirement credits, then he locked in the largest benefit for my mom. When he passed away, my moms survivors benefit was my dads benefit.

Also crucial: keeping a hawks eye on your spending before and during retirement. Combine that vigilance with an aggressive savings plan. And the importance of paying down debt, and avoiding new borrowing, cant be overstated.

She also has 100 percent home care, Ms. Cheng said. We did this because my grandmother lived to 94.

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Resist The Urge To React To Short


Hi Im Judith Ward, vice president and thought leadership director at T. Rowe Price.

Coming into 2022, we were cautious about the markets prospects. And so far in 2022, security markets have been highly volatile.

But our research suggests that even if investment returns are lower in the near future, you dont need to change course if you are saving appropriately for retirement. However, workers over 50 might benefit from saving more.

The good news is, we found that a large majority of workers participating in their workplace 401 plans are not reacting to market events by changing their investments.

And, the amount theyre contributing to their 401 plans has remained relatively stable.

There are a number of things you can do to cope with expected lower returns and market volatility. First, build up an emergency fund to help prevent needing to liquidate your investments for emergencies or tap in to your retirement accounts when markets are fluctuating.

Second, maintain an age-appropriate asset allocation. Younger investors, for example, should have higher allocation to stocks and increase the allocation to bonds over time as retirement approaches.

Finally, if you are close to or in retirement, you should review your retirement spending plans. Our research suggests that a more conservative spending approach would have worked well for those who retired into bear markets in the past.

Make Sure Your Portfolio Is Diversified

Protect Retirement Savings stock photo. Image of deposit

The recent stock market volatility is a good reminder to have a diversified portfolio, which means having a variety of stocks as well as bonds and cash. This can help reduce your risk.

If you participate in a workplace retirement plan, see if that plan offers model portfolios of the investments available to you through the plan, Keady said. You could create your own portfolio based on one of the models. You also could opt for a target-date fund that will automatically adjust your stock and bond holdings as you near retirement.

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What Are The Risks Of Not Protecting Your Retirement Money

If you dont protect your retirement money, you could lose everything if the stock market crashes. This is because your retirement savings are likely invested in the stock market.

Another risk is that you could outlive your retirement savings. This is because traditional retirement accounts do not offer any protection from inflation.

Protecting Your 401 From A Stock Market Crash

Any time you put your money in the stock market or other investments, you always run the risk of losses. While you can make largely educated decisions, things dont always go to plan. Also, because youre talking about something as important as your retirement, emotional decision-making can come into play.

Despite the above, there are many strategies, simple and complex, you can use to mitigate risk. For instance, spreading your assets across multiple types of investments and areas of the market can allow you to avoid the volatility that comes with stock-picking and concentrated investment positions.

Everyone has short-term expenses that periodically arise. For example, you might need to repair your car, replace a broken household appliance or pay for a medical procedure. Long-term expenses are even more prevalent, including student loans and mortgages. However, the best thing you can do is treat your retirement savings just as important as all of your other needs. This will ensure your pool of retirement funds will continue to grow over time.

Below are some of the most influential strategies you can use to minimize losses in your portfolio, even if a stock market crash comes around. Just remember that you can never eliminate risk entirely, though.

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How To Protect Your Retirement Savings When The Market’s Bad

The primary risk that retirees and those approaching retirement face is an obvious one: running out of money. However, a study published in the Journal of Financial Planning suggests reverse mortgages can help retirees protect their portfolios from market dips and extend their savings.

Rather than relying exclusively on distributions from investments, retirees can temporarily replace those withdrawals with income from a reverse mortgage line of credit when their portfolios lose value during downturns. Doing so minimizes sequence of returns risk the danger posed by taking distributions during a down market and lowers the chances that a retiree runs out of money.

A financial advisor can help you plan for retirement and devise an asset withdrawal strategy that meets your income needs. Find a trusted advisor today.

Sequence of Returns Risk in Retirement

For investors with a longer time horizons before retirement, market volatility does not automatically equate to risk. After all, an investor in her 30s has decades to recoup losses that her 401 incurs during a market selloff or full-blown bear market.

Remember Why Its Important To Protect Your Retirement Savings From A Recession

How To Protect Your Retirement Savings in 2022

Your financial mission statement will help you keep a long-term perspective. This is essential for millennial parents, many of whom have lived through two recessions in their working lives.

Given that rocky past, millennials tend to have less wealth today than previous generations did at the same age, the Pew Research Center notes.1 The center found that the median net worth of households headed by millennials was about $12,500, compared with $20,700 for households headed by boomers the same age in 1983. Gen X households at the same age had a median net worth of about $15,100. This disparity underlines the importance of protecting your 401 in a recession.

Andy Hill, founder of the blog and podcast , learned this lesson first-hand during the Great Recession. During the housing crisis and subsequent 2008 recession, Hill owed $180,000 on his home mortgage, but the houses value had sunk to $110,000. Getting out of that underwater mortgage required him to temporarily decrease funding to other financial priorities, including retirement.

If youve been through a recession and youve been impacted, then youre going to remember it, he says. I certainly did.

For millennials like Hill, personal experience with a recession has prepared them for future challenges. They know how important it is to help protect your retirement savings from a crash.

There are no retirement scholarships, unfortunately, Hill notes.

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Don’t Overlook Healthcare And Long

According to a Fidelity Retiree Health Care Cost Estimate in 2022, a retired couple would need around $315,000 saved to cover health care expenses in retirement. However, with people more likely to live longer, they will need to pay even more down the road. So, keep that in mind when constructing your retirement plan.

And, to make matters worse, this figure does not include long-term care costs. You might want to set aside a separate fund for long-term care costs to secure your retirement income. Additionally, you should consider long-term care insurance. This could help protect seniors over 65 who may suffer from disabilities, chronic conditions, need nursing care, and home health care.

Also, if you have an annuity, ensure you attach a long-term care rider to cover these expenses. There are also stand-alone LTC annuities if you’re interested.

Inflation Will Reduce The Real Value Of Your Retirement Income

Retirees have relied on the 4 percent rule. According to many experts who say its an outdated strategy, this approach may not work in coming market cycles and more prolonged than expected time horizons. Even Vanguard has published information pointing out some holes in the retirement income plan.

Inflation and higher prices will reduce the real value of your retirement income, so you need to be proactive and make changes to your portfolio.

According to the 4% rule, the retiree should start with 4% of the retirement portfolios initial value. This number is based on research that suggests a retiree can withdraw 4% of their initial investment each year and then add the inflation rate to this amount every year to offset inflation effects and maintain the standard of living.

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Have A Plan For Taxes

Individuals dont always understand how taxes can impact their retirement savings and assets. Capital gains, inheritances, and estate taxes can heavily reduce your retirement fund. In turn, this reduces your savings.

Thats why, when planning for retirement, consider all the taxes that your savings, assets, and income may be subject to today and tomorrow. Consulting a financial advisor for direction is also strongly recommended.

Know The Rules And Regulations Of Your Retirement Plan

How to Protect Your Retirement Savings from Market Losses

You and your ex-spouse can decide how to split up certain retirement plans such as a 401 in a divorce along with other financial assets if applicable. Of course, agreement rarely comes up during a divorce. Thats why its best to seek professional legal and financial help to make sure you come up with a clean divorce agreement that wont leave you open to loopholes that can suck your hard-earned cash.

Divvying up retirement accounts in a divorce is different from splitting other types of assets, because specific tax laws and regulations governing these plans. The court cant simply order you to split retirement accounts in half.

In any case, your summary plan description would give you some details as to where your assets would go in a divorce. If you receive retirement benefits from work, you can get it from your employer. Otherwise, you can contact your plan administrator.

But, well cover the basics of how you can protect specific retirement plans below. Well also cover other steps you can take to shield your entire financial picture.

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Consider Health Care Costs

When planning for retirement, its essential to consider all the potential costs that come with it, including the rising out-of-pocket costs for health care expenses.

According to Senior Living, the average annual cost of a semiprivate room in a nursing home is $94,900, and the average yearly cost of assisted living facilities is $54,000. Home health care homemaker services run about $59,495 per year.

Think About Preparing Yourself For The Unexpected

  • Consider setting aside three to six months expenses in a money market or similar account that can be accessed easily.
    • Dont worry about funding it all at once set a goal for yourself and work toward it over time with My Savings Plan®.
    • Couples should consider maintaining separate accounts such as checking, brokerage, or savings in their own names.
    • Think about protecting any family members you support financially by maintaining your appropriate level of life insurance.
    • Ensure that your homeowners insurance coverage keeps pace with your real assets.
    • Even if your company offers disability insurance, consider purchasing your own policy, too, to be sure you have sufficient coverage.

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    How To Protect Your Ira In A Divorce

    You dont need a QDRO to split Individual retirement accounts and Roth IRAs. If you already had one or more of these accounts during your divorce, the court would likely split under the incident to divorce provision in the tax code This allows the balance to be split among both ex-spouses tax-free within a year following the official divorce date.

    In any case, you should continue to invest whatever portion of your retirement plan you keep. If you still have a long way to go before retirement, this money will continue working for you by growing in the market. If youre closer to retirement, consider buying an annuity.

    But Keep Cash For Emergencies

    GoldCo – How To Protect Your Retirement Savings With Precious Metals.

    Ideally, you should have enough cash in a savings or money market account to cover three to six months worth of expenses. If people have put aside money thats going to cover near-term cash needs, that should ease their minds considerably, Keady said.

    If you dont already have an emergency fund, start building one so you dont have to raid your retirement savings or rely on debt to get you through a tough time. You might actually have more cash in your budget you can set aside for emergencies if youre spending has been curtailed by the coronavirus.

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    Don’t Withdraw Too Much From Savings

    Spending your savings too rapidly can also put your retirement income at risk. For this reason, we believe that retirees should consider using conservative withdrawal rates, particularly for any money needed for essential expenses.

    We did the mathlooking at history and simulating many potential outcomesand landed on this guideline: To be confident that savings will last for 2030 years retirement, consider withdrawing no more than 4%5% from savings in the first year of retirement, then adjust that percentage for inflation in subsequent years.

    Consider a sustainable withdrawal plan: Work with a Fidelity professional to develop and maintain a retirement income plan or consider an annuity with guaranteed lifetime income7 as part of your diversified plan, so you won’t run out of money, regardless of market moves.

    Read Viewpoints on How can I make my retirement savings last?

    What Are Some Other Ways To Protect Your Retirement Money

    There are a few other ways to protect your retirement money. You can ladder CDs to ensure that you always have money-earning interest, no matter what happens in the stock market. Or, you can invest in Treasury bonds, backed by the U.S. government and offer a guaranteed interest rate.

    You can also create a retirement income plan that includes a mix of investments, such as stocks, bonds, and annuities. This will help to protect your money while still giving you the potential to earn more money.

    No matter what method you choose, the most important thing is to have a plan to protect your retirement savings. By doing this, you can rest assured that your money is safe and secure.

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    Look For More Ways To Save For Retirement


    No matter how much or how little money you are able to save, it’s important that you start as soon as you can to maximize retirement savings and income for your future.

    If you’re finding it difficult to cover your everyday expenses and also put away savings, there are still some options. Check out TIAA’s online insights about how to manage your money. Also, you can start envisioning your future by creating a customized action plan with our financial calculators.

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