10 Things To Do To Plan For Retirement
This section describes reasons why some investors may invest in mutual funds when they plan for retirement. A mutual fund investment is generally offered through a prospectus and in those states in which the broker dealer is registered. Mutual fund investments can lose value and are not guaranteed, please make sure you consult with your investment professional.
When making a decision to set aside funds for retirement on a regular basis, an investor should consider one's ability to make regular investments and one's ability to make investments through periods of major price swings.
Whether you save on your own or at the workplace, here’s something you should keep in mind: Uncle Sam wants you to save toward retirement and provides you with the necessary incentives to do so.
In addition to creating and funding an IRA every year, there are other things you should do as you move closer to retirement.
Determine how much money you’ll really need.
By the time you retire, your mortgage may be paid off and your kids may be on their own, so you’ll have less expenses…right? Well…not necessarily. Health care costs are likely to increase significantly. There may be the financial responsibility of taking care of an aging parent or spouse. And a second home can add expenses as well.
Now’s the time to review every expense – from basic necessities to those extras you can’t possibly do without – to see what your retirement will really cost.
Develop a sensible income plan for retirement years.
Some experts state that you should multiply your first year retirement expenses by 20 to 25. But only you know how much you’ll really need for retirement years. Consider your projected lifespan, the amount you intend to withdraw from IRAs and other investments, the rising cost of health care, your estate goals, and more. Now’s the time to invest systematically, to make sure the money is there when you need it.
Reallocate the money in your various retirement accounts.
Perhaps the bulk of your money – let’s say 75% -- was allocated for growth funds, with the remainder in bond funds. The rise and fall of markets might have caused these percentages to shift. It always makes sense to regularly review your accounts and rebalance them if necessary.
Increase your 401(k) and other salary-deferred contributions.
You’ll want to contribute the maximum to your 401(k) or other “free money” matched by your company. Even a small increase in contributions over time can make a big difference. Let’s supposed you raise 401(k) contributions by just 2%. In just 10 years, you could have in excess of $9,200…which would grow to over $75,000 in 30 years.
Start thinking about retirement distribution options.
Should you take money out of your Roth IRA at 59 ½ or let it stay and compound? When should you apply for Social Security? Are there other assets that come into play? Stay on top of the timelines and options for your retirement plan assets.
Save beyond the general contribution limits.
If retirement is looming fast, you may be able to invest beyond the basic contributions limits. If you’re at least age 50 and if your plan allows, you can contribute an additional $5,000 over your employer’s plan annual limit ($2,500 for SIMPLE plans). It’s a great way to play “catch up”.
Set aside funds for an emergency.
As a general rule of thumb, about three to six months of expenses should go into your liquid, interest-bearing emergency fund. That way, you’re not caught unprepared if there is a medical emergency, major home repair, dental work, or a family member’s incapacitation or death.
Keep beneficiary designations current.
Have you gotten married or divorced, had a child, lost a parent, or any other life-changing event? Then it makes sense to update your IRA beneficiary status. Talk to your financial advisor to make it happen.
Work with a good lawyer and financial planner.
Make sure your lawyer reviews your will, power of attorney, and trust so that your loved ones are protected. And by all means, speak to your financial advisor about your future plans and set milestones and goals to reach.
And, of course, move towards your savings goal through an IRA.
If you’re not covered through an employer’s retirement plan, it’s essential that you fund your own retirement and get a tax break in the process. Recent tax laws allow you to contribute more than ever to your retirement accounts; you’ll want to take advantage of those increased limits. Click here to review the various IRAs available to you.