Top Tips to Boost Your Retirement Savings

|December 3, 2021

It’s an all-too-common story among Americans… finding yourself close to retirement and lacking the savings you need to live a comfortable life in your golden years.

So what do you do? How do you catch up?

In my latest video, I answer those questions and provide my top tips for giving your retirement savings a boost.

And the best part? You don’t have to live like a monk… or take huge risks to do it.

It’s all in the video below.

Transcript

So let’s say, I don’t know, you’re approaching 70, you’ve left it late to save for your retirement. How do you catch up? What do you do? I want to share some top tips with you on exactly that. Okay.

So let me, first of all, start off with, I think what’s the most important slide and then some more broader points. Now for me, as you know, I’m an investment specialist, so I’m going to start off with the investing part of things. And you might say, “Look Alpesh, I might only have a thousand dollars set aside. What the heck are you talking about investing?” Well, I’ll come with some of the broader tips in a second, but I want to show you this slide to begin with and what this shows is, if you were to contribute a small amount, even if you’re starting off at a relatively small sum to begin with, and you were to contribute as much as you could each month – and we’ll come to contributions in a second – then you can see that even after 10 years, you get to quite a sizable, reasonable amount.

And yet we started off with a minuscule, near-$0 amount. What’s critical to all of this is that 40% figure, and that’s high. That’s an implied annual rate of return. Now, in some years in the stock market, we’ve had that. In others, we’re nowhere near that. So the first thing is, well, of course, return is going to make all the difference. If you’ve got a minuscule 10% return per annum, you’re not going to end up anywhere near the kind of goal you need. Equally, if you take too much risk and say, “Oh, I’m going to go for some crazy, high-risk thing, which will just keep giving me 100% returns,” you’re going to lose your initial capital. And all investing of course is risky. So we’ve got to find that balance

Now, for me personally, for my retirement account, as an expert, of course I’ve set a 40% target. Not every year achieves that. During the financial crisis, I didn’t get 40%. Last 12 months, of course, far more than that, but it’s not thanks to me. It’s thanks to the broader markets. So that’s my long-term average, annual average. Okay. That’s what I’m targeting. That’s what I want to get. If you even make a slight adjustment in that and you get that a bit lower, I’m afraid you miss your figures. So it’s that balance between risk and reward.

Let’s talk also then about more broader things that you can do. Of course you want to try and get that reasonable return, which is what I’m all about. That’s what my target is. Align for the fact as we know, and as I’ve said, there is of course risk in the markets and in all investing. So what are the things we can do to make sure we’ve got enough capital to improve and increase those contributions and what can we do to make sure we get close to that 40%? Now, obviously it’d be churlish for me to say, “Hey, to get that 40%, just follow me.” That’d be an overstatement, but I think that’s probably a pretty sensible step anyway.

You want somebody with a track record, but what about more broadly, what can you do if you are a late retirement saver? Well, top tips, first of all, just try and eliminate debt, especially expensive debt. And that’s often credit card debt. Work out, on a piece of paper – or a spreadsheet if you’re that way inclined – work out what you’re paying the most interest on. Not necessarily what your monthly outgoing is the least on. That’s one factor, but also what you are paying the most interest on. So you can see how much of your money is going into interest payments, which is just a waste, even if each month very little is going out. So just work out those numbers. At least have a look at the numbers, and I know you’re going to hate it. Everybody hates looking at debt. Okay.

Then cut costs, see where you can cut costs. I don’t mean to make your life miserable, but there’s often substitutions we can have. Okay. We know inflation is hitting and prices of things are going up. Well, let’s see if we can cut some costs by substituting away instead of just eliminating things and living like a monk. Budget, find out a budget, know what your incoming is, what your absolute essential outgoings are as well. Consider downsizing, if you can. Won’t apply to everybody, but you know, bite the bullet. I know we like stability, but consider that.

Of course, save in order to add those contributions to your pension savings to get that 40% maximize and get your money working harder on it. Focus on returns. Like I said, the 40%, not the exceptional, not the crazy sums and the speculative gambling side, but avoid the risk. So make sure you’re comfortable with that risk that comes with that 40%, because what if the markets go sideways in the investments that you might make?

Consider staying in the job longer. Consider maximizing your retirement account contributions. Sometimes you can even catch up with past-year contributions, and remember the tax benefits of doing so because that money’s growing essentially pretty much tax-free. Consider side hustles. For me, a side hustle… because all hustles have risk involved because they’re entrepreneurial activities… the greatest side hustle of all for me… so I originally trained as a lawyer… the greatest side hustle is investing because at least I’ve got a better handle on my risk and I don’t have to buy a warehouse or find some goods to sell on Amazon and have all that cost, which has to go out with no idea of what the returns are going to be.

I’d rather be investing in some companies, which if things pan out great, I get the return, get to see it. I get 100% of the rewards, and if it doesn’t pan out, at least I can click a button and get the heck out of there and I can see every day how it’s doing. So those are the key pieces of advice I’d give someone on all of this. And I know it’s a lot of stuff you might not want to do. Might not even enjoy or like, but all success comes from, well, tackling the bull by the horn, and we’ve had some great bull markets.

So I hope given my specialty, you do consider that as the root to catching up on your retirement. So after all, people don’t realize their retirement funds, if they have invested – maybe in their 20s, 30s, 40s – they’re invested in the stock market anyway. You’re just catching up on that and taking more control of it. So you could potentially be at an advantage of being more in control and more knowledgeable. Try and turn it around into a positive, okay. Have that spirit of not, “I’m late.” Well, history is prologue, as is often said. Instead, just look at the future and say, “Nope, I’m going to get to grips with this. It’s going to be an exciting journey. I’m going to do it. And I’m going to learn a lot, and I’m going to succeed.” Self-belief is critical in all of these things as well. And that self-belief will come from education and knowledge. Hope you’ll continue following me. Thank you very much.

 

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