Did you recently enter your 50s? If so, you may see retirement quickly approaching. It’s hard not to look ahead when retirement is so close. However, you also may want to use this period to nail down the final steps of your retirement planning. The last few years of your career may be your last opportunity to boost your savings, cut your costs or protect yourself against risk.
Below are a few steps to consider before you head into retirement. If you haven’t yet taken these steps or even developed a retirement strategy, now may be the time to do so. A financial professional can help you implement these steps and others so you can enjoy a long, financially secure retirement.
Take advantage of catch-up contributions to your qualified accounts.
For many Americans, qualified plans like a 401(k) or IRA are a primary retirement savings vehicle. These accounts are popular because they offer tax-deferred growth. That means you don’t pay taxes on growth that occurs inside the account as long as the funds stay inside the plan.
In 2018 you can contribute as much as $18,500 to a 401(k) plan. If you are 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 up to $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 you’re already saving as much as possible. However, you may want to use this time to make cuts to your spending and find more money to save. If you can maximize your qualified account contributions, you may be able to significantly boost your savings just before entering retirement.
Develop your retirement budget.
Nearly 60 percent of Americans don’t use a budget.2 A budget is one of the most powerful financial tools at your disposal, as it helps you make informed spending decisions and stay on course to hit your goals.
A budget is even more critical once you enter retirement. You may need to make your assets last for several decades. That means you’ll need to monitor your spending so you don’t deplete your savings in the early years of retirement.
A budget can also be helpful as you plan for retirement. You can estimate your spending to determine how much income you may need each year. That can help you decide how much money to save annually and how to invest your funds.
Create sources of guaranteed* income.
You’ll likely have some level of guaranteed income from sources such as Social Security and pensions. If you’re like many retirees, however, those sources are unlikely to fund all your expenses.
Guaranteed income is a valuable tool because it provides a base level of certainty. You can count on that income regardless of how the markets perform or how long you live. That can help you make more confident financial decisions and plan your spending. It can also reduce your withdrawals from savings, so you can preserve those assets for emergencies.
You can use tools like annuities to convert some of your savings into guaranteed lifetime income. A single premium immediate annuity lets you convert some of your assets into a guaranteed stream of income that never changes, no matter how the market performs. You can also use tools such as variable annuities, which offer some growth potential along with guaranteed retirement income.
Ready to finalize your retirement strategy? Let’s talk about it. Contact us today at Sprouse Financial Group. 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.
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