How to maximize your retirement savings
The IRS, which earlier this month extended its deadline for filing income taxes, also postponed the deadline for individual retirement account contributions to May 17. The extra month could help those trying to reach their retirement planning goals if they have yet to hit their IRA contribution limits for 2020.
"We have a lot of people who are getting tax refunds, who got stimulus checks — they've got money on hand," CBS News business analyst Jill Schlesinger told CBSN.
"They have the ability to put that — up to $6,000 — away before tax filing deadline in their IRAs or Roth IRAs," she added. "And by the way, if you're over the age of 50, you can actually put an extra $1,000 in."
Schlesinger said tax refunds could be used to supplement or address what she called the "big three" of personal finance: padding your emergency reserve fund, paying down debt or saving for retirement.
With stocks in the U.S. recently hitting record highs, Schlesinger said some people are taking on more risk in their portfolios. "And yet, if we go back a year ago… I was saying, 'Calm down, don't bail out of everything.' So in a weird way I want you to remember that you felt awful last year when you were scared, and the market was plummeting. And that will help inform you today," she said.
Spread out those eggs
"For most people we use diversified portfolios — some stocks, some bonds, some cash, maybe some commodities, and that allows you to spread out risk. And essentially, you don't want everything acting in the same way at all times," Schlesinger explained. "And the other important aspect of this is that it's easier now to do this. Every big investment company allows you to take a risk assessment questionnaire. It takes into account your age and your comfort with risk, and it will build out a portfolio for you. It's really a few clicks. But remember, the old idea of 'don't put all your eggs in one basket' — it holds up with your portfolio even if your best friend put all of his or her money into GameStop and made a gazillion dollars."
When it comes to your retirement savings, Schlesinger offers a simple — but vital — piece of advice: "Start."
"I hear from people all the time on my podcast, and they tell me like, 'I just started with $25 a pay period and it worked.' And you can accumulate what you need if you are diligent and you just keep at it. So the consistency is so important," she said. "So don't be discouraged if you feel like you got a late start. Just do something. Get into this habit of saving for the long term. It really does help and allows you to maintain it throughout your work years."