How to balance financial priorities and save more for retirement
- Competing financial priorities can make it difficult to save more for retirement.
- You may wish to give grown children or aging parents a helping hand, but it’s important to find a balance between your near-term demands and longer-term goals.
- Use extra cash wisely and make sure your retirement accounts consist of a diverse mix of investments.
For most of us, life is full of financial demands and goals, and sometimes the competition for your dollars gets fierce. You may be assisting aging parents or anticipating college tuition bills just as you are trying to save more for retirement. Competing priorities can make it tough to keep your retirement savings on the front burner.
"Lots of people may need to find the balance between near-term financial demands and longer-term goals," says Marcy Keckler, Ameriprise Financial Vice President, Advice Strategy and Programs.
These four tips can help.
Take advantage of small windfalls
Put the majority of any extra cash you receive beyond your paycheck into retirement savings. This could include bonuses, raises or tax refunds. Because you've likely been living fine without these windfalls, you can bulk up your retirement savings without feeling like you're making a major sacrifice, says Keckler.
Save for retirement before college
College costs can be so expensive it is tempting to put all your resources into saving for that goal. But, that can be a mistake, says Keckler. If you jeopardize your retirement savings for college savings, you may end up paying for your children's education only to depend on them financially down the road. Remember, says Keckler, there are student loans, but there are no loans to pay for retirement.
Lend a helping hand carefully
It's natural to want to help when your grown child may be having trouble getting started or your aging parent is struggling. But, too much generosity can jeopardize your retirement savings. With your children, ask yourself if you might be helping too much. "Many parents are tempted to provide financial support to their young adult children, so they can have a comfortable lifestyle." says Keckler. "But, it's okay if your children 'rough it' a bit while they get started," she adds. That can help build independence and pride in their accomplishments as they can support an improving lifestyle on their own.
You may need to evaluate how much help to give your elderly parents, as well. You may need to balance spending to support them with saving for your own future retirement needs and elderly care. Be sure you first maximize any resources in your community to help care for your parents. For help determining what your parents may be eligible for, contact your local Area Agency on Aging.
Double-check your diversification
At this stage in your life, you may be saving in several different retirement vehicles such as a 401(k) plan or IRAs. Investors often don't realize that dollars invested among various mutual funds held in these vehicles may not be significantly more diversified than if you held only one investment account. This is because large equity and fixed-income mutual funds, the type commonly used by 401(k) and IRA investors, often invest in the same or similar securities. Just because you have dollars in different funds doesn't guarantee the underlying holdings are diversified.
Get started today
Your Ameriprise financial advisor can review your plan to help you diversify your investments, set priorities and make sure you’re on track for retirement. By breaking it down into doable steps, your advisor can help make retirement planning more manageable.
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