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5 Strategies for Boosting Income in Retirement

The Silver Tsunami — a term that refers to the largest surge of retirements in American history, which experts say will take place between 2024 and 2027 — is approaching the US, and many people are not prepared for it. Experts are also saying that as many as two-thirds of those set to retire are not financially prepared.

“The goal for any retiree is to enter that season of their lives with retirement savings that will fuel a healthy income stream for the rest of their lives,” says Aaron Cirksena, Founder and CEO of MDRN Capital. “But stats show many Americans have not taken the time to plan for their retirement and now it is catching up with them.”

MDRN Capital is a full-service firm that enhances the retirement planning process by leveraging the power of modern tools to deliver a fully digital experience, allowing clients to meet with advisors and open accounts without the challenges posed by in-person meetings. Its approach considers every nuance of its clients’ retirement aspirations and provides a complete retirement planning experience that maximizes efficiency and impact. 

Financial concerns are driving many Americans to work past the normal retirement age to make ends meet, but as Cirksena explains, delaying retirement is not the only option. “There’s good news for retirees who haven’t yet hit their financial goals,” he says. “Retirement doesn’t need to be the end of wealth building. There are several strategies retirees can use to improve their financial standing after they stop working.”

The following five retirement income strategies are among the most effective for increasing funds after you’ve entered your retirement years.

1. Seek out low-cost investment options

Optimizing the value of retirement investments starts by ensuring you aren’t paying more than you need to in fees. The fees for 401(k) accounts, for example, can vary from as low as 0.5 percent to as high as 2 percent annually. While the difference may seem small, even a 1 percent difference can have a considerable impact on your earning potential throughout retirement.

Consider the example of a retiree with $200,000 in savings, the median amount for those aged 65 to 74 in the US, who earns a 7 percent annual return. Over 15 years, a 2 percent management fee will reduce earnings by $46,396 compared with a 1 percent management fee.

“Fixed indexed annuities are an investment option retirees can access with no fees,” Cirksena shares. “They are a unique and attractive option that allows investors to protect the principal they invest while also gaining access to some of the upside of the market. If you’re looking to minimize fees and possibly secure a guaranteed stream of income, fixed indexed annuities are something you should explore.”

2. Keep your risk strategy current

Risk strategy is a key component of retirement planning. In their younger years, investors will often opt for an aggressive, higher-risk strategy aimed at higher returns. As they approach and enter retirement, the level of risk will often be dialed back to guard against significant losses.

“Increasing risk is not the norm for those who have entered retirement, but it could bear fruit for those who need to build additional wealth,” Cirksena says. “A professional financial advisor can provide strategies for temporarily shifting toward a more aggressive strategy to increase retirement holdings.”

3. Maximize tax efficiency

Different types of retirement accounts carry different types of tax obligations. Understanding those obligations and orchestrating your withdrawals to minimize their impact can help to stretch financial resources in retirement.

Those holding funds in a traditional IRA or 401(k) are subject to required minimum distributions that face the same tax obligations as ordinary income. By delaying or spreading out withdrawals, tax burdens can be minimized. Converting funds to Roth IRAs, which allow for tax-free withdrawals, can also help extend financial resources in retirement.

4. Take steps to reduce debt

“Mortgages and other consumer debt can involve interest rates that are higher than the rate of return on retirement accounts, which makes them a big drain on retirement savings,” Cirksena explains. “To minimize the impact of debt, make paying it off or refinancing for better rates a priority in your early retirement years. Limiting new debt by reducing discretionary spending will also leave more in your retirement accounts to earn interest.”

5. Optimize social security benefits

In general, social security benefits are designed to provide retirees with 40 percent of their annual preretirement earnings. However, delaying benefits can increase the amount of social security retirees receive.

“Delaying benefits is not always a smart strategy for retirees, but it can be helpful in some cases,” Cirksena says. “You’re entitled to an additional 8 percent per year for every year you delay your benefits, which means starting benefits at age 70 instead of age 67 increases the amount to 124 percent of your full benefits. A professional financial advisor can help explain the implications of delays and determine if it will be helpful based on your overall retirement picture.”

As the Silver Tsunami approaches, many of those on the verge of retirement face a difficult decision. Due to a lack of retirement funds, leaving the workforce means settling into a lifestyle that isn’t on par with what they desire. Developing a retirement income strategy that boosts income in retirement provides a solution for those who feel unsure about launching their retirement.

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