Did you just turn 50? Or are you within 10 to 15 years of retirement? If so, you may already be dreaming about your future life after you leave the working world. While it may be easy to plan vacations and think about your free time after you retire, this is also a good time to implement the final steps in your financial planning.
Below are a few action items to consider as you approach retirement. If you haven’t developed a retirement strategy, now may be the time to do so. A financial professional can help you fill the gaps in your planning so you can enter retirement with confidence.
Take advantage of catch-up contributions.
Do you use a 401(k) or an IRA as your primary retirement savings vehicle? These accounts are popular because of their unique tax treatment. They offer tax-deferred growth, which means you don’t pay taxes on growth that occurs inside the account as long as the funds stay inside the plan.
In 2018 your 401(k) has a standard contribution limit of $18,500. If you’re age 50 or older, however, you can contribute an additional $6,000 in catch-up contributions, giving you a total allowable contribution of $24,500. Similarly, you can contribute as much as $5,500 to an IRA, with an extra $1,000 in catch-up contributions available for those 50 and older.1
You may feel like there’s no room in your budget to make additional retirement contributions. However, this may be your last, best opportunity to accumulate retirement assets. Look for areas to make spending cuts so you can take advantage of the increased contribution limits.
Create your retirement budget.
Nearly 60 percent of Americans don’t use a budget, which is unfortunate because a budget is one of the most powerful planning tools at your disposal.2 It’s especially useful for retirees. It helps you make smart spending decisions and lets you know whether you’re on track to reach your goals.
Remember that you could be retired for several decades. If you spend too much money in the early years, you could deplete your assets before you reach the later years of retirement. A budget can help you minimize that risk.
You can use your current spending to estimate your expenses in retirement. Factor in potential changes, such as downsizing to a smaller home or paying off outstanding debt. Also, be sure to account for inflation. Your cost of living is likely to increase throughout your retirement.
Create sources of guaranteed* retirement income.
You’ll likely have some source of guaranteed income in retirement. Social Security is the most common example. It’s guaranteed to last as long as you live. You could also have a pension. These types of income are helpful because they provide a base of financial security no matter how long you live or how the financial markets perform.
You can create additional sources of guaranteed income with your personal savings. Annuities are often an effective strategy. Many annuities offer various ways in which you can convert a portion of your savings into a guaranteed lifetime income stream. For example, a single premium annuity lets you create a guaranteed stream of income based on your life expectancy.
Ready to finalize your retirement strategy? Let’s talk about it. Contact us today at Baacke Insurance Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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