3 Tips to Improve Financial Literacy as You Approach Retirement

Retirement is a prospect that can make even the most financially savvy investors a little uneasy. And if you’re someone saving for retirement in your 50s and beyond, you might feel as though there’s simply not enough time to get that target figure stashed away.

While it’s true that retirement planning is best started early, unforeseen and shifting circumstances can throw even the best-laid plans awry. Because countless variables can impact your ability to save before retirement, investors must see improving their financial literacy as an ongoing effort to better secure their post-employment livelihoods.

Saving Late in Life Means Staying Educated

On the subject of financial literacy, many older Americans make one of these assumptions: They think they’ve already saved enough, or they figure that they’ll never have enough and avoid educating themselves on new wealth management strategies. Both are acts of complacency that can yield decisions that ultimately damage overall financial health.

Even if you do want to be proactive, without first taking responsibility for your financial literacy, you might adopt wealth management strategies that work against you rather than for you. For instance, many older Americans still assume that shifting retirement portfolios away from equities and into high-quality bonds will allow them to generate decent retirement returns and limit risk exposure. Indeed, this strategy has worked for millions in the past. However, in today’s market — characterized by rising inflation and meager bond yields — it could be a recipe for disaster, as it can produce negative real returns.

So what options do you have if you want to avoid bad investment strategies and improve your financial literacy to better set yourself up as you approach retirement? Here are a few tips:

  1. Learn about alternative asset classes.  People tend to become more risk-averse as they get older, and for good reason. The older you are, the less time you have to bounce back from a risky investment gone wrong or an unexpected market downturn. But a desire to avoid risk shouldn’t keep you from exploring your options. In the current environment, older Americans might consider exploring asset classes such as investment real estate, private equity, foreign bonds, preferred equities, gold, and others that could help diversify away from stocks while generating enough yield to offset the impact of rising inflation.
  2. Examine your spending habits.  If you’ve been working and saving for many years, retirement is not the time to adopt a carefree fiscal attitude. A long vacation or new car might be firmly within your budget, but don’t make a big purchase without first assessing its impact on your long-term financial picture. If you’re like most people over the age of 50, housing costs could account for more than one-third of your spending. You might consider relocating or downsizing to reduce property taxes and monthly utility bills while keeping more retirement income in your accounts. Regardless of your current situation, try to align your spending habits with your big-picture financial goals, and use those benchmarks to inform any significant financial decisions.
  3. Explore new opportunities to build wealth.  Once you’ve reached the age of 50, you can contribute more to 401(k)s and IRAs than you could when you were younger. These catch-up contributions can help you grow your retirement savings account relatively quickly, and there’s little reason not to take advantage of them (especially if you waited until later in life to start saving). Moreover, if you’ve paid off major expenses (e.g., college tuition, mortgages, or car leases), you’ll have new opportunities to allocate funds to your savings. Work with your financial advisor to find out how to maximize those opportunities.

Saving for retirement shouldn’t be a scary prospect. By actively working to improve your financial literacy as you age, you can better understand the options available to you before and during retirement.

Are you wondering how to improve financial literacy and needing guidance on how to invest as you get older? Visit Pekin Hardy Strauss Wealth Management now to consult with one of our advisors, set up a time to build a plan that matches your goals, and let time work for you rather than against you.

 This article is prepared by Pekin Hardy Strauss, Inc. (“Pekin Hardy,” dba Pekin Hardy Strauss Wealth Management) for informational purposes only and is not intended as an offer or solicitation for business. The information and data in this article does not constitute legal, tax, accounting, investment, or other professional advice. The views expressed are those of the author(s) as of the date of publication of this article and are subject to change at any time due to changes in market or economic conditions. Pekin Hardy cannot assure that the strategies discussed herein will outperform any other investment strategy in the future.