Did you break your piggy bank? Tips to rebuild your retirement account

All of us, in one way or another, were affected by hurricanes Irma and Maria. The damage varied in magnitude. In some cases, the impact was such that it meant taking money we had put away for our retirement and using it for unexpected expenses or repairs after the storms. Our finances were also affected, leaving us with questions like: What can we do now? How can we replenish that money and put our financial plan back on track?

We spoke recently with Carlos G. López, retirement planning specialist in Banco Popular, who helped us answer some of these questions.

What strategies do you recommend to replenish the retirement savings we had to use ahead of time? When we talk about savings for retirement, there are several things to consider for achieving a more secure financial future.

Reevaluate your finances “Just as we are gradually rebuilding our homes and restoring our properties, it is important to also repair our finances, including our retirement savings.  As time passes on, expenses for gasoline, diesel, and so on are becoming things of the past. Now is the time to evaluate your financial plan and redirect some of that money you used over the last few months for contingencies, back to your retirement savings. This might be a good time to revisit your budget and emergency fund, if you haven’t done that yet. That way, step by step and in an organized manner, you will be able to replenish the accounts you have withdrawn money from,” López says.

Start as soon as possible Time is on your side. Starting to save money for your retirement early on will mean greater potential for your assets to appreciate. Not just because you will have more time to accumulate money, but also your account may generate interest. Plus, if your employer offers matching contributions, you will be maximizing the benefits in your plan. “When we talk about investment products with a long-term horizon like 15 or 20 years or more, there is a greater probability that the yield on those products will work in our favor. Start as soon as possible to save whatever you can—the sooner, the better,” López said.

Save a little more “You might be surprised with what $20 more a week can do. You could see exponential effects when even a small amount is deposited in the right product. But it is important that the contributions are constant and sustainable. If we set ourselves a goal that is too aggressive, we run the risk of not continuing with our contributions. It is better to contribute a more modest amount that you feel comfortable with, so that you can keep contributing in the long run. Then, as you are able to increase your contribution, do so. That is the ideal scenario,” López points out.

What products are available to increase retirement funds? In addition to the employer’s retirement plan there are individual retirement accounts (IRAs). This product is another long-term savings alternative that helps you accumulate the funds you need for a sustainable financial plan when you reach retirement age. “There are also products like certificates of deposit, or CDs, bank accounts, and investment accounts. Although this type of account does not always have the tax benefits that employer retirement plans and IRA accounts do, they could be an essential part of your plan. These products will help you create a diversifying effect. For example, if you need to withdraw money at a time when the stock market is declining, you could withdraw money from other products, without touching the investment accounts. This will provide products that are subject to the stock market time to recover,” López explains.

How can I take control of my finances? Review your finances yearly, including your retirement plan! If you have questions, seek the advice of a financial advisor, who can guide you with the steps to follow and the alternatives available.  

The information and general descriptions contained in this article are designed to help you understand the factors that you should generally consider when evaluating the appropriateness of any strategy or investment in your retirement plan. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; is not intended to be viewed or construed as an advice or as a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. Investment products are not insured by the FDIC, are not obligations of, or guaranteed by Popular Bank or any of its affiliate/subsidiary; and involve risks, including possible loss of the principal invested.  Banco Popular de Puerto Rico and/or its subsidiaries and affiliates are not engaged in rendering legal, accounting or tax advice. Should legal, accounting or tax advice be required, the services of a competent professional should be sought.