Improve your financial security, risk-free with these tips

There are ways to reduce risk when it comes to your personal finances.

There are ways to reduce risk when it comes to your personal finances.


The entire US stock market recently entered correction territory, meaning it was down more than 10%. Bond markets have also produced negative returns recently. The Russian invasion of Ukraine tops the list of geopolitical tensions. Every direction you take exposes some form of risk that could disrupt your quest for financial security.

Although there is never a truly risk-free phase in the investment markets or in the global economy, there are several ways to improve your personal finances that don’t require taking risks to grow or maintain. your assets.

Not all of these options apply to everyone, but just about everyone could find something in this list that applies to them.

Don’t miss the game

Depending on the survey you’re looking at, between 20 and 25 percent of employees don’t contribute enough to their employer’s pension plan to earn the full company match. Those who can’t find a way to save more in the retirement account are missing out on free money, a guaranteed, risk-free return on their investment. Some employers have vesting rules to delay true ownership of company dues, but that’s not a good reason to pass up the free money.

Go easy on student debt

One of the reasons many young people don’t save enough in their workplace retirement plans to earn the match is that they keep directing their savings into student loan debt. Education can be a productive use of debt if it leads to more skills and qualifications for higher career earnings, but it’s easy to overstate the amount of debt. Comparing the cost of public and private colleges is a decision point that influences the level of debt for many. Debt could also be reduced by choosing a community college for the first round or by pursuing Running Start programs while still in high school. Every dollar that doesn’t need to be reserved for debt and can instead be invested can make a significant difference in lifetime financial security.

Do not keep a credit card balance

Your personal financial risks can be reduced when you have no non-performing debt. Credit or financing for things other than education or a home can be an expensive option when you can’t live within your means until you can afford to buy something cheaply. For the debt you have, pay off your highest interest credit/loan first.

Delay Social Security

Unless you are unable to work and do not have sufficient income or are in poor health and do not expect to live long, you should not take Social Security benefits during of first eligibility at age 62. In many cases, it is even suboptimal from a long-term financial planning perspective to begin collecting Social Security at your “full retirement age” according to Social Security calculations. Perhaps waiting until maximum benefits at age 70 can provide much greater protection against one of your most important and often overlooked risks – your longevity. Social Security is a cost-free, risk-free stream of income that comes with cost-of-living adjustments. You won’t find this type of assurance or return on investment anywhere else. Waiting 62 to 70 to receive social security leads to 76% more income. In some cases, it makes more sense to tap into other retirement savings first, allowing you to receive carryover credits for Social Security.

Postpone retirement for a year

If you want more protection against investment risk, working just a little longer can make a big difference. An extra year of income (presumably part saved and invested) can relieve your investment portfolio a bit and generate a higher return. Working more also means spending less time in withdrawal mode, financing your retirement expenses.

Be a tax expert

Improving your after-tax investment returns reduces the risk of missing your goals by keeping more of your money. Use a Roth IRA (if eligible) for your highest expected return investments. Collect capital losses in non-retirement accounts to offset capital gains and reduce overall tax owed. Manage the order in which you withdraw money from different types of accounts in retirement to achieve more efficient taxable income and possibly prevent your health insurance premiums from rising. Convert pre-tax retirement accounts to after-tax Roth IRAs during low-income years. In non-retirement accounts, own investments that don’t generate a lot of currently taxable income.

Consider where you live

Downsize your home to liquidate your home equity as another source of retirement income. Move to a state with a lower cost of living. Consider a roommate situation to reduce expenses.

Proactive planning and thoughtful decisions, applied over time, can help you reduce risk in some areas and better withstand risks that you cannot avoid in other areas.

Gary Brooks is a Certified Financial Planner and the President of BHJ Wealth Advisors, a registered investment adviser in Gig Harbor.

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