As February unfolds, the dust settles on the faded echoes of New Year’s resolutions. While intentions like strict diets and new budgets might have slipped by, one duty remains undeniably important: your annual retirement review.
The outset of the year represents a pivotal moment to assess the trajectory of your retirement plans—regardless of whether you’re actively employed or have transitioned into enjoying the fruits of your Social Security. What better time than now, with a complete year’s worth of investment outcomes and personal expenses at your disposal, complemented by a rejuvenated outlook on your golden years and the financial considerations it entails?
Studies, like one featured in the Journal of Clinical Psychology, state that roughly 116 million American adults set New Year’s ambitions every January, but a staggering half abandon these aspirations within six months. Concurrently, about 4 million individuals will celebrate their 65th birthday this year, as per census data analyzed by the Alliance for Lifetime Income—a nonprofit sector associated with the annuity industry. An overwhelming majority of them face the challenge of financing decades of life ahead.
It’s imperative, whether still in the workforce or savoring retirement, to reconcile your envisioned retirement plan with its real-world progression. For many, retirement is uncharted territory, fraught with a steep learning curve. People often misconstrue the finish line as the onset of retirement, but true success lies in arriving there with an unwavering financial foundation.
To guide you through a thorough audit of your retirement strategy, here’s our IFW checklist:
Financial Reflections: What’s Going Out?
February serves as the ideal month for collating financial statements such as credit card yearly summaries, tax records, and, if it applies, Form 1099 notifications for independent contributors. This data paints a clear picture of net-income versus expenditure.
Prudent Portfolio Oversight: Are Your Investments on Track?
More than just assessing past performance now’s the chance to scrutinize your asset allocation for apt diversification—your safeguard against undue risk. After witnessing a soaring stock market, ensure your investments aren’t disproportionately equity-heavy, especially before potential market retreats. Re-evaluate risk levels, particularly for those nearing or in retirement.
Medicare and Social Security Strategy: Have You Thought Ahead?
Contemplating retirement? Begin exploring Social Security benefits strategies 3-5 years in advance, which may include spousal benefits or even claims against an ex-spouse’s record, conditional to a minimum 10-year marriage duration. Full benefit ages range from 66-67 for those born post-1954, yet deferring benefits can yield an 8% increment per year until the age of 70. Married couples might encounter complex scenarios—online calculators and professional advisors can offer clarity.
Tax Considerations: Maximizing Your Assets?
The structure of retirement withdrawals, pension and Social Security timings, and any supplementary income could spell significant tax implications for your retirement. The age-old adage stands: the less tax paid, the further your nest egg stretches.
Insurance Evaluation: Is Your Coverage Still Relevant?
Throughout your career, robust term life insurance is advised, poised to address debts and provide for loved ones. As retirement dawns, such extensive coverage might no longer be essential.
The Digital Aftermath: Do You Have a Plan?
Approaching or amid retirement, a detailed outline of your assets becomes increasingly critical. Alongside tangible assets such as property or pensions, digital presence (account information, passwords, online identities) demands careful documentation.
Amidst the daunting financial intricacies of retirement planning, don’t lose sight of envisioning your ideal post-work life. The myriad of investment decisions, tax concerns, healthcare particulars, and additional considerations in retirement may appear insurmountable for the solitary planner. While it’s not compulsory to engage a financial advisor comprehensively, periodic consultations can prove beneficial.
So as you ponder the landscape of retirement ahead, take this time not only to consider ‘how’ you’ll retire, but also ‘what’ retirement will mean to you. Remember, a financially secure retirement is merely the starting point; the end goal is a fulfilling and worry-free chapter of life.
After 18 years as President and Founder of TheaterMania and OvationTix, Darren is excited to be on a new journey as the President and Co-Founder of The Institute of Financial Wellness. (The IFW)
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