How to improve your retirement strategy

How’s your retirement strategy holding up? Even some of the best laid plans for retirement have been undone by variables that you might have been able to predict — if you’d taken the time to address them ahead of time. Here’s a look at some common “leaks” that sink retirement plans, and the actions you need to take to plug them.

Worrying about risk in the wrong way

There’s an old rule regarding investment risks that your bond allocation should equal your age — if you’re 65, 65 percent of your nest egg should be kept in fixed income and 35 percent in stocks. However, not all rules are set in stone. Instead of thinking about your savings as one or two lumps, try thinking about it in smaller, separate lumps. One lump is for basic living, one for long-term healthcare and one for lifestyle/entertainment. From there, you can decide how much risk you’re willing to take with each lump. For example, it might make sense to take a little more risk with your entertainment lump than with your healthcare lump.

Focusing on Social Security instead of savings

Waiting as long as possible to take on Social Security payments is a good idea. However, this only makes sense if you can hold off on taking payments without tapping into your retirement savings. Instead of viewing Social Security as “I must wait as long as possible” check what your monthly benefits will be depending on when you start accepting them. Then determine what the impact will be on your savings. If it seems like you’ll need to dip into savings just to make it to max Social Security payments, reconsider waiting things out.

Ignoring taxes

Don’t forget about the taxes that come along with selling holdings or withdrawing money to pay for retirement. One strategy to lower your overall taxes? As CNNMoney reports, using tax-loss harvesting in taxable accounts. This involves selling a losing security to realize the loss, then using it to offset capital gains in your portfolio. You can also use Roth IRAs when possible, as those withdrawals are tax-free.