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5 Steps to Maximizing Your Retirement Savings

5 Steps to Maximizing Your Retirement Savings

Bob Feeman | MainStreet.com

March 10, 2010

2. Diversify your savings

If you employer has stopped matching your 401(k) contributions, this might be a good time to consider diversifying some of your retirement savings to a low-cost IRA — say, one offered by a mutual fund company such as Vanguard. These accounts offer similar tax advantages to 401(k)s, and will give you an opportunity to set up and manage a retirement account separate from your employer, which might prove beneficial if your current plan is costly.

3. Consider a Roth IRA

Younger investors might want to consider moving part of their retirement savings to a Roth IRA. The contributions will come out of after-tax income, but that might prove beneficial in the long run, since the eventual withdrawals will be tax-free, and will likely be taken when an investor’s tax rate is significantly higher.

4. Write off losses

A strategy called “tax loss harvesting” allows you to write off any investment losses you have, but this applies only to taxable investments, and not to traditional retirement investments accounts such as IRAs. However, it can apply to a Roth IRA. Generally, the strategy calls for selling off your investments, taking the loss, and claiming a tax deduction up to $3,000 for the calendar year. If your net loss is more than $3,000, you can carry it forward into the next year. Also, after 30 days, you can repurchase the investment without a penalty.

5. Seek expert advice

Finally, don’t panic. This isn’t the time to stop contributing to your retirement accounts. Remember, any investments you make now are being bought when the market is down, so you actually have more purchasing power than you realize. Many stocks can be had at bargain-basement prices. Seek the help of an expert by visiting a financial planner or CPA, and set realistic goals, build a well-diversified portfolio and hold tight until the market improves.

This article was originally published on TheStreet.com.


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