As you near the end of your career, it’s important to take time to make sure your retirement strategy is sound. The final years of your career may be your last opportunity to strengthen your plan, save more money and address any looming risks. Time is limited, so nailing down those final steps is essential.
The start of the new year provides the perfect chance to review your retirement plan and financial goals for the future. After all, it’s the season for life-changing resolutions. In 2017, consider skipping the resolution to go to the gym more often and instead resolve to get your retirement planning in order.
Below are three retirement resolutions to consider. If you have only a few years left in your career, you don’t have much time to address any lingering financial concerns. Make 2017 the year you get your retirement plan finalized.
Create a strategic Social Security plan.
Choosing when to file for Social Security benefits may be one of the most important decisions you’ll make in retirement. Once you choose to file, there’s no going back, so it’s important to give careful consideration to the options available and understand the financial implications of each possibility.
You become eligible to claim your full, nonreduced benefits once you reach full retirement age, which varies slightly depending on the year you were born. Most people’s full retirement age lands somewhere between their 66th and 67th birthdays.
While it’s possible to claim Social Security as early as age 62, doing so can significantly decrease the amount of your benefit. The earlier you file before your full retirement age, the greater the percentage by which your payment will be permanently reduced.
Another option is to wait to file, potentially up to the age of 70, which actually increases the amount of your payments. You get a benefit credit of 8 percent for each year past your full retirement age that you delay Social Security benefits. For example, if your full retirement age is 66 and you delay filing to age 70, you get a 32 percent benefit increase, or 8 percent for each of the four years that you delayed your filing.1
Take advantage of catch-up contribution opportunities.
There’s currently a provision that allows people age 50 and older to make catch-up contributions to 401(k) and IRA funds. Increased contribution limits can be a great opportunity to add significant padding to your nest egg.
For both standard and Roth IRAs, the catch-up provision allows you to contribute an additional $1,000 per year, which means a possible total contribution of $6,500. For 401(k)s, the limit increases by $6,000 for those age 50 and older, which enables you to contribute up to $24,000 to your retirement funds.2 When you take investment growth into account, even a slightly greater contribution can have a significant impact on your future.
Develop a budget for projected retirement expenses.
When planning your retirement, it can be helpful to create a budget for what you think your expenses will look like. While you may not be able to accurately predict all costs, you can probably estimate many of your projected expenses. With a budget in place, you can then estimate your income needs, which may help you to better determine whether you have sufficient savings to retire.
If you find that your projected income isn’t enough to support your lifestyle, consider making changes to your plans. You could cut back on spending or even downsize to a more affordable home. You could delay retirement by a few years so you can save more, or you might think about working part time in the early years of retirement.
Ready to get serious about your retirement plan this year? Let’s start the conversation. Give us a call to speak with a retirement planning professional today. We welcome the opportunity to connect with you.
1https://www.fool.com/retirement/2016/10/28/the-5-point-personal-finance-checklist-for-60-some.aspx
2https://www.trustetc.com/resources/investor-awareness/contribution-limits
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