Sometimes a sports team wins a championship on the strength of a tough and stingy defense. Other times, it is a dynamic, high-scoring offense that leads a team to a trophy. Dynasties though -- teams that succeed year after year -- are generally built around an effective blend of offense and defense.
Similarly, in building your retirement savings, there are certain things you should do to accumulate more money. That is like playing offense. Then there are things you should do to protect the money you have, which is like playing defense. If you get both offense and defense working for you, it can increase your chance of success.
Here are three examples of offensive tactics -- moves to help you accumulate more money for retirement:
- Match banking products to your needs. Do you have money that has been sitting for years in a savings account without being touched? Then you may be better off with a CD, since five-year CD rates are more than 12 times the average savings account rate. Do you pay off your credit card balance in full every month? Then you should be in a rewards program. The only additional cost is typically a higher interest rate, which would not affect you since you avoid carrying a balance.
- Shop for rates regularly. Whether you choose a savings account, money market account or CD, shop for rates regularly. There can be big differences in the rates offered by different banks, so make sure you are near the top of the heap by comparing rates regularly and change banks when necessary.
- Choose winning investments over complete market cycles. As you accumulate retirement assets, you may see several track records for mutual funds and other investments. Look at these over periods of both rising and falling markets to make sure you are getting an investment approach that can succeed in a full range of conditions.
Here are three examples of ways you can better hold onto what you already have:
- Make it a rule: Do not pay for a checking account. Free checking may be rare, but it is not extinct. You should be able to find it with a little shopping around, especially if you look at online checking accounts.
- Do not accept rate increases without shopping around. Speaking of shopping around, anytime you are hit with a rate increase, whether it is insurance, cable TV or mobile phone service, use it as a cue to shop around. Too many businesses follow the strategy of bringing people in at a low promotional rate and then ratcheting the cost up steadily over time.
- Never carry credit card debt. Thirty-year mortgage rates are just over 4 percent, and the average car loan is not much higher. Credit cards, on the other hand, charge an average of more than 13 percent annually. The contrast makes it clear just what a bad deal credit card interest can be.
It would be easy to dismiss these as small measures, but they can pay off for you every day. Multiply those everyday benefits by the number of days you have until retirement and the figure will likely be well worth the effort.