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Retirement Planning

If last year taught us anything, it’s that life is unpredictable and that plans change – especially plans for the future. Whether you’re one year or one decade from retirement, there’s no better time than now to review your retirement savings goals for the year ahead.


To help, we compiled ten tips for savvy saving in 2021, all while keeping the world’s current state of uncertainty top of mind:


1. Prepare for Early or Unexpected Retirement.


If you are in your 50’s or 60’s, you should start thinking through a retirement “plan B”, so you’ll be ready if unexpected circumstances merit it. According to a 2019 Employee Benefit Research Institute (EBRI) survey, nearly half of retirees left the workforce before their preferred retirement age – and Covid-19 has only boosted that percentage.


2. Resolve Debt Immediately.


The number of folks in their 60’s and 70’s with mortgages, credit card debt, and student loans has exploded in recent years. In fact, student loan borrowers in their 60’s owe an average of $33,811. It’s near impossible to make headway on debt when you’re on a fixed income, so put in that extra work now so you can alleviate the burden of debt later.


3. Have a Plan for Health Insurance?


The typical American couple pays almost $300,000 in co-pays, additional premiums, and other medical expenses during their retirement years. This makes clear that Medicare is only the beginning of your retirement healthcare strategy. Having policies with different riders can make those expenses much more manageable.


4. Maximize HSA Contributions.


Contributions are tax-deductible, the money accumulates tax-deferred, the money accumulates tax-deferred from year to year, and withdrawals are tax-free if used for qualified medical expenses. This can make small medical expenses much more manageable and keep you from digging into your bank account to pay for them.


5. Explore Retirement Income Options.


Most people are best served by putting off Social Security withdrawals and 401(k) distributions for as long as possible, or until they reach full retirement age (67 for Social Security). But by age 72, you are required to receive minimum distributions (RMDs). Speak with a financial advisor who understands the difference between these options – including the tax and estate planning consequences.


6. Live Like a Retiree Now.


If you haven’t before, carefully track your spending so you’ll have an accurate picture of your income needs in the first year of retirement. Creating a budget for yourself can be a great tool to see what money is needed and where extra money can be saved. Make adjustments as needed since you may no longer have expenses associated with commuting, but you may want to increase your travel spending.


7. Revisit Your Coronavirus Hardship Withdrawal.


If you took advantage of the waived withdrawal penalties made possible by the CARES Act, have a plan for replenishing those funds. Additionally, while the Act waived early withdrawal penalties, you’ll still owe income tax on the amount you withdrew.


8. Assess Your Risk Tolerance.


You probably have a better gauge of how you respond to risk after a year like last. Take that info and get honest about how your income streams could weather another ‘surprise’ like a pandemic. Once that’s clear, match your savings goals to your risk tolerance.


9. Investigate Part-Time Employment.


As you move closer to retirement, think about existing relationships you have that could turn into a revenue stream down the road. Now is also the time to dream…always wanted to work with animals? Or children? Or own a bakery? Go for it!


10. Ask if You Should Press ‘Pause’ On Retiring.


Given all the economic uncertainty facing the U.S. and the world, it could be wise to postpone your retirement plans – at least temporarily. If you’re not financially where you’d like to be, consider postponing retirement for a year or two. There’s a lot to ponder as you make plans to retire.


The good news is you don’t have to go at it alone – we’re here to help navigate all your options so that you feel confident about your retirement plans. Just give us a call at (269) 324 – 0080.

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