Close to retirement? Here are 6 variables to consider as a Pre-Retiree

Considering the current low interest rate environment and the expectations of the return of a volatile market, you may want to revisit your investing and financial strategies as well as your retirement timetable. Even if retirement is still several years away, you can determine how well your assumptions about retirement have held up considering the increased volatility in the financial markets and the number of jobs under threat because of the economic slowdown.

1. Do You Have an Emergency Fund?

If you do not have an emergency fund and are still employed, consider setting aside part of your wages to fund one. This will help you deal with unforeseen expenses without having to use a credit card or borrow from a retirement plan. Your goal should be to save enough money to cover three to six months' worth of expenses. Check out the following for more tips on creating an emergency fund:

2. Should You Maximize Your Social Security Benefits?

You may want to delay receiving Social Security benefits for as long as you can afford to do so. Even though you can start collecting Social Security retirement benefits as early as age 62, you will not be eligible for the full benefit at that time. You can also postpone signing up for Social Security until after your full retirement age (FRA) -- the age at which you will be eligible for full benefits -- in which case benefits increase (8% per year up to age 70 for those born in 1943 or later). FRA is based on your year of birth. For example, if you were born in 1960:

• Age 62: receive 70% of your monthly benefits (the minimum amount)
• Age 65: receive 86.7% of your benefits
• Age 67: receive 100% of your benefits
• Age 68: receive 108% of your benefits
• Age 69: receive 116% of your benefits
• Age 70: receive 124% of your benefits (the maximum amount)

3. Can You Save More?

If you already have a job and an emergency fund, you should work towards increasing your savings. Living below your means involves cutting back on discretionary expenses. Look for places where you can reduce your spending. Moreover, consider selling household items, jewelry, or clothes you no longer use or want through online sales sites (often in exchange for a small commission). Again, save any money you generate from selling these items or use it to pay down debt.

4. Are Your Investments Sufficiently Diversified?

Diversification¹ is an important investment strategy that involves spreading your money among a variety of funds or portfolios holding different investments in a variety of asset classes. The thinking behind this strategy is that spreading out your investments will help you manage risk in your portfolio since one asset class may rise while another falls. However, the stock market’s severe volatility has forced many investors to revisit their investments. You may need to reevaluate your asset allocation to match your particular risk tolerance, time frame, and investment goals. For example, recent events may have convinced you that you are taking on more investment risk than you are truly comfortable with. You may also be drawing closer to your anticipated retirement date and might want to focus on asset preservation rather than asset growth.

5. Should You Stop or Reduce Retirement Plan Contributions? You may be tempted to preserve cash by reducing or eliminating your retirement plan contribution. However, you should think carefully before doing so. The money you contribute to your plan is intended to provide for you during your retirement years when you will no longer be receiving a regular paycheck.      You will want your money to work 24/7 on your behalf for as many years as possible to take advantage of compounding².

6. Reach Out to a Professional These are unusual and stressful times. If you think you would benefit from the input and guidance of an expert, email our financial expert at educacionretiro@popular.com. If you have a 401k plan with Popular, remember that you can count on our group of representatives at TeleBanco Popular® for access to or guidance on how to use your 401k- digital account at yourbenefitaccount.com/banco. Simply call us at 787.724.3657 (press option 2 twice).

¹Diversification and asset allocation do not ensure a profit or protect against losses. Investing in mutual funds involves risk, including loss of principal. Mutual funds are offered and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses, and charges of the investment company before investing. For more thorough information about any mutual fund, including risks, charges, and expenses, please contact your financial professional to obtain a prospectus. The prospectus contains these details as well as other important information. Read it carefully before you invest. ² Interest earned from the original principal plus accumulated interest. Not only is the interest earned on your contributions, but also on the accumulated interest.

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