Now is a good time to review your retirement savings strategy and fine-tune it if necessary. Here’s a look at some key areas to review:
Ask yourself if your retirement date, health and anticipated spending in retirement date, health and anticipated spending in retirement have changed. Perhaps you’re willing to live on less in order to retire earlier. Or maybe you believe you will travel more in retirement, which may require greater savings or a later retirement. If your goals are fluid, your strategy should adapt to them.
How much are you putting away toward retirement? Is the amount sufficient to help you reach your financial goals in retirement? If you are coming up short, contribute a little extra to your retirement plan. In 2019, you may contribute up to $19,000 annually (if your plan allows), plus an extra $6,000 if you are at least age 50. And if you contributed to a 401(k) plan, your contributions are tax deferred.
Your Investment Mix
Many near-retirees take a more conservative approach with their investments as they near their magic date. You may want to work with a financial professional to make sure your investment mix remains in line with your goals, attitude toward risk and time horizon.
One important way to increase your disposable retirement income is to shed as much debt as you can leading up to your big date, starting with credit card balances. If you’re used to buying a new vehicle every few years, try keeping it a while after paying it off. The money you save can go toward paying down debt.
Your Retirement Income
How much you put away for retirement and how much of it you can spend are two different animals. That’s because taxes can have a significant impact on your disposable income. Downsizing your home and even renting can reduce the real estate taxes you’ll pay. If you’re open to moving, you might want to examine states that treat the taxation of retirement income and Social Security payments favorably. Or, if you qualify by income, consider opening a Roth IRA with its tax-free withdrawals in retirement.