Retirement Resolutions for the New Year
Resolve to Strengthen Your Financial Future Regardless of Where You Are in Your Working Life
Each new year brings with it the promise of a fresh start, a chance to reassess, and to begin again. It’s the time for resolutions, big dreams, and goal setting–and maybe even for building a new life in retirement. Whether you’re nearing that new phase of life, or you’ll be working for many more years, setting retirement resolutions can help you prepare for and strengthen your financial future. Resolutions are easy to break, but with the right amount of intention and commitment you can get on track for a fulfilling and successful retirement –and stay there. No matter where you are in your retirement planning, the retirement resolutions below can help you to strengthen your retirement plans as you step into 2022.
Resolutions for While You’re Still Working
Recommit to Investing in Yourself by Upping Your Investments into an IRA
When it comes to putting money aside in a retirement savings account, it’s typically recommended that you meet any employer match, if possible. As you grow in your career and your income increases, think about upping how much of your income you’re setting aside. If doable, try to put anywhere from 10%-15% of your salary into a retirement account. If that seems too extreme, up your contribution by 1% each year and whenever you receive a pay raise.
Strengthen Your Savings
A great way to ensure that you’re staying committed to putting money into a savings account is to automate it. Set up your finances so that every time you’re paid, a specific amount of money goes directly from your paycheck into savings. When you’re responsible for doing this manually, there’s more opportunity for temptation to take over and for you to spend your money before it ever gets to your savings.
Additionally, because of compound interest, having a solid savings strategy in place early on means that your savings has more time to grow on its own. By the time you retire, you’ll have additional money in your savings that’s essentially free money you made simply by planning ahead.
Make a Plan for Your Future Health
One of the biggest threats to financial security in retirement is the cost of healthcare. Medical bills only get more expensive the older we get and the more complex our health becomes. A great option to plan ahead is to see if your employer offers a Health Savings Account (HSA), which offers triple tax benefits – the money put invested into the account is tax-free, the money grows in the account tax-free, and the money you withdraw (so long as it’s for qualified health expenses) is tax-free, too. It’s important to note, however, that these accounts can only be used with a high deductible health insurance plan (HDHP).
Look into Life Insurance Options
For some, life insurance can seem unnecessary, especially if you don’t have any dependents. However, life insurance can be a great retirement planning tool when done correctly. It helps pay for funeral expenses, as well as taking care of your debt once you die. It can also help you create a wealth transfer plan or support a surviving spouse, and it gives you the opportunity to give to charity after you pass away.
Abolish Your Debt
Debt can feel overwhelming, and most Americans have debt of some kind. You don’t want to worry about debt in retirement, so resolve to tackle it now. Start with paying down the debts that have the highest interest rates first, then work from there.
Establish a Strong Framework for Your Retirement Plan
A great way to determine how much money you want to have saved and by when is to run a retirement projection five to ten years before retirement. Sit down with a financial advisor and go over your long-term financial goals, then have them run an analysis on your financials to see if you’re on the right track to achieving them, as well as when you can realistically expect to retire. This can help you shore up your retirement plans, see where you might be lacking, and address any issues that may be crippling your chances at financial success in retirement.
Resolutions as You Near Retirement
Fill in All the Blanks
While financial planning is definitely an important part of retirement planning, it’s not the entirety. What are you going to be doing with your free time? Where will you be living? Are there any big bucket list experiences you want to cross off? Having clarity on how you want to spend your time in retirement can also help you better prepare for how much money you’ll need to save.
Create a Retirement Budget
Once you’ve been thoughtful about what your ideal retirement looks like, make a budget that accurately accounts for your vision. If you want your life to look similar to the way it did while you were working, then you’re going to have to make sure that you have a similar level of income. If you want your life to look differently, then you’re going to need to adjust your income based on your wishes. Make a plan for where your income will come from, how much of it will go to monthly living expenses, and how much you’ll have left over to do all those things you want to do with your free time.
If your schedule allows, consider taking a few weeks or months away from work to play pretend with retirement. If you’re planning to move, rent out an Airbnb for a while and spend time in the area you plan to live in. If you plan on spending your retirement reading and working your garden, take a few weeks doing nothing but that. This can help you mentally and emotionally prepare for what life is going to be like in retirement, while also helping you get a firm grasp on what your spending habits may look like, as well.
Maximize Your Contributions
Once you hit the age 50, you get the ability to put more money into your 401(k) and IRA accounts than you previously were able to. If you can, take advantage of this opportunity by increasing your contributions. The maximum contribution limits change annually, so be sure to do your research so you know just how much you can contribute.
Establish a Social Security Strategy
At the age of 62, Americans are eligible to begin claiming Social Security benefits – but that doesn’t mean that 62 is the right age for everyone to start collecting. When it comes to Social Security benefits, there are three options available – you can claim your benefits early at 62, you can claim them right on schedule when you retire, or you can postpone claiming your benefits until age 70.
Each option comes with its own list of pros and cons, so be sure to take time to really think about what option is best for you. For instance, claiming your Social Security benefits at 62 means that you’ll get financial support earlier in life – but your monthly checks will be permanently reduced. Those who delay receiving their benefits until age 70 receive larger monthly checks, however, they won’t get that early financial support that some retirees need.
(E)State Your Wishes
No one wants to think about their own mortality, but death is inevitable. If you want the peace of mind that comes with knowing your wishes will be met when you’re gone, you need a legally documented plan in place. Update any wills, estate plans, and power of attorney documents to ensure that they accurately state what you want to happen with your assets once you’re gone.
Resolutions Once You Retire
Be Smart with Your Investments
It can be scary to have your hard-earned money invested into something as volatile as the stock market, and this is especially true once you’re no longer working and your ability to make up lost money diminishes. However, try to keep your emotions out of your financial decisions and refrain from taking out too much money when stocks drop. If you pull out too many funds during a market downturn, then you run the risk of experiencing a significant drop in account value which can be incredibly hard to bounce back from. Have e long-term plan and stay the course.
SEE ALSO: The Two Stages of Money in Retirement
Update Your Financial Plan to fit Current Legislation
In the wake of COVID-19, there’s been a significant amount of legislation passed that carried with it huge implications on a person’s financial plans and future goals. Make sure that you’re well-versed on any recent laws that may affect your finances and retirement plans, such as new laws regarding withdrawals, contribution limits, Social Security benefits, or taxable income.
Get Creative with Your Income
Just because you’ve retired that doesn’t mean you need to stop working entirely. Perhaps you love your job and want to keep working for your company but in a less-demanding role. Or maybe there’s a job that’s in line with something you’re passionate about that you want to take up, like working for a local non-profit. Or, if you have a hobby or a skill you enjoy – such as knitting or web design – see if you can monetize it.
The possibilities for how you spend your time and how you can make money in retirement are endless. Get creative with how you want your retirement to look and don’t hold back from trying out new opportunities.
The Ultimate Resolution: Start Today
Regardless of which retirement resolutions best fit your stage of life, starting now is the best way to accomplish your goals. Retirement planning can be a daunting task, but the earlier you begin deliberate planning, the less stress you’ll find yourself carrying as you near retirement. Take advantage of the New Year and use these resolutions as a guide to help get you started or strengthen your current retirement plans so that you can have the peace of mind that comes with knowing that you’re on the right track.
At Peak Financial Freedom Group, we have an entire team of qualified professionals who are dedicated to helping our clients achieve the retirements of their dreams. If you’d like to sit down with one of our team members to begin creating a comprehensive written retirement plan for your unique needs and goals, please contact us today.