January is almost over. Have you completed your retirement review?

January is almost over.  Have you completed your retirement review?

The crash diet has crashed, a brand new budget won’t change anything, and your Peloton is now the world’s most expensive laundry rack. But even if all of your New Year’s resolutions succeed, there’s still one early-year task you’d be wise to tackle: reviewing your retirement.

Financial planners say this is the perfect time to take stock of where your retirement is headed — whether you’re still employed or you’ve stopped working and are now collecting Social Security. This gives you a full year of investment returns and personal spending to review, as well as a momentary refresher on how you want to spend the last phase of your life, and the costs that come with it.

A study in the Journal of Clinical Psychology estimates that approximately 116 million American adults make New Year’s resolutions each January, but more than half will abandon them within six months. And nearly four million people are expected to turn 65 this year, according to an analysis of Census data by the Alliance for Lifetime Income, the annuity industry’s nonprofit research arm. Almost all of them will need to support themselves for decades.

Whether you’re still working or have already retired, reviewing your retirement plan and how it’s shaping up when compared with reality is an important step, says John F. Kennedy, author of the book “Saturday Everyday” and said Michael Cruz, chief executive of North Texas Wealth Management at Allen. Texas.

“Most people have never retired, and if you have never retired, the learning curve is steep,” Mr. Cruz said. “People think the goal is to reach retirement, but that’s only half the goal. The goal is to achieve retirement and not run out of money.”

Here are some key areas you will want to review.

January is a great time to collect your annual reports from credit cards, as well as tax documents, any Form 1099 notices for gig workers and freelancers and, if you are paid, your final pay stub of the year. It allows you to see what your after-tax income is and how much you’re spending, said Bill Dendy, president of Alicorn Investment Management in Dallas.

“This is the perfect month to track how much you spend on a monthly and yearly basis, so you can work out where your money is going each month,” Mr Dendy said.

Those numbers are key to planning the income you’ll need in retirement and, once you stop working, determining whether your spending is in line with your budget.

A common recommendation is that retirees should only have about 80 percent of the income they had while they were working. But in the early years of retirement, people often plan trips or make major purchases like a boat or recreational vehicle, and spend as much or more than they did while they were working.

“With inflation, the costs are higher, and some people may realize that the number they have budgeted as the ideal number for retirement is too low,” Mr. Dendy said.

In addition to reviewing the performance of your investments, this is a good time to check your asset allocation to ensure that your money is diversified so that you can avoid taking on too much risk. After a big year for stocks — the S&P 500 finished the year up 24.23 percent — investors will want to make sure their money isn’t overly concentrated in equities before the market turns sour. They should also consider whether their investment mix has an appropriate level of volatility and risk for those nearing or approaching retirement.

“People wait to make adjustments until we have a big market correction, which is the worst time to make changes,” Mr. Dendy said, “because that leads to real losses.” “It’s OK when you’re 30, but when you’re 70, it’s a challenge.”

Investors who have started out with a reasonably diversified portfolio may also want to check whether their holdings need to be rebalanced back to their original investment plan. Some larger brokerages offer automatic rebalancing that can be set up online.

Three to five years before you retire, look into different strategies for collecting Social Security, such as claiming spousal benefits, which may include claims against a former spouse’s benefits if your marriage ended. It must have been at least 10 years. The age to receive full benefits is between 66 and 67 years. People born after 1954, For those who delay collecting benefits, the monthly amount increases by 8 percent per year until age 70. Coordinating benefits with a spouse can be complicated. Online calculators exist, including those Social Security Administration website, and some paid online services; Calling an agency or financial planner may also help.

“You need someone who can run those numbers for you and discuss the pros and cons,” says Daphne Jordan, a senior wealth advisor at Pioneer Wealth Management Group in Austin, Texas, and president of the National Association of Personal Financial Advisors. he said. “People may also not know the logistics of Medicare and if you don’t enroll on time, and whether you’re working or not, there may be a penalty.”

How you structure withdrawals from retirement accounts, when you collect pension payments and Social Security benefits and whether you earn any income from working or other sources can have a big impact on your retirement. The bottom line is that the less taxes you pay, the longer you can keep your nest egg intact.

Many retirees don’t realize that about half of all Social Security recipients are taxed on their benefits and that earnings above a certain threshold may result in a monthly Medicare surcharge, which is at the highest income levels. . can bring premium From $594 per month. If you turn 73 this year, you’ll also face taxes on your required minimum distributions (hazardous RMDs) from tax-deferred retirement accounts, including individual retirement accounts and 401(k).

Some retirees may benefit from the tax benefits of transferring tax-deferred money in a traditional IRA or 401(k) to a Roth IRA, which makes all future withdrawals tax free. Retirees under age 73 may want to delay Social Security and pension payments early in retirement so that IRAs and other accounts are depleted before RMDs begin. Yet another strategy is to send RMD payments directly to charity if you don’t need the income, which can cut your tax bill. In all cases, you must decide whether to have income taxes withheld from Social Security, pension payments, and account withdrawals or make quarterly estimated tax payments.

In short: If you think figuring out taxes while working is complicated, wait until you retire.

“It’s important to have someone calculate your tax estimate before you start taking money out of your accounts,” Ms. Jordan said. “There are going to be tax considerations.”

During your working years, carrying a large amount of term life insurance – enough to pay off your mortgage and other debts and cover your loved ones for at least a year – is a prudent financial move. Once you and your partner are in retirement, that coverage may become unnecessary.

“Once you retire, the house can be paid off, and there won’t be the same level of income loss if you die,” Mr Dendy said. “But now it may make sense to convert a life insurance policy to a long-term care policy, although it may not make sense for an individual. Long-term care may be worthwhile for a couple, but it’s a real shopping program to get the best long-term coverage for your situation.

Many single retirees can live without long-term care because they cannot afford to spend all of their assets and leave a spouse nearly destitute. With the cost of long-term care exceeding $100,000 a year for those without Medicaid coverage, another option is to consider life insurance or annuities that offer that coverage as a rider. Some combat veterans may qualify for long-term care coverage under assistance and presence Benefits paid by the Department of Veterans Affairs, although the process for claiming those benefits can be complicated.

As you approach or enter retirement, it’s a good time to take a detailed inventory of what you own, where those assets are and how your family members or friends can find that information. In addition to investment and bank accounts, pensions, insurance policies, trusts, annuities, deeds, titles and other documents, you will also need to compile a list of account usernames, websites and passwords.

Taking photos or video of your home’s contents, including jewelry and other valuables, is a great way to catalog your property. You will also need a durable power of attorney (to manage finances) and a health care power of attorney (to make medical decisions), a health care privacy document, any end-of-life directives, an updated will, and any appropriate trusts. Will be required. ,

“This is a good time to look at your estate plan and check the beneficiaries on your retirement and financial accounts, as well as insurance policies,” Ms. Jordan said. For example, if a former spouse is still listed as a beneficiary on an old bank or 401(k) workplace account, that money goes directly to that person, even if you’ve remarried. “If you’re older, this is a good time to think about whether your children know about your estate plans and where all those documents are located.”

“People say, ‘I’m going to work forever,’ but what happens if you get diagnosed with a disease,” said Mr. Cruz of North Texas Wealth Management. “There are no plans for this.”

While many people can handle retirement savings and investments during their working years, the myriad of considerations for investing, taxes, health care, benefits, insurance and more in retirement can be beyond the capabilities of even a successful individual. While not everyone needs a financial advisor to manage this, even an occasional meeting with a fee-only financial or retirement planner can be helpful.

Planners warn that people can become so focused on the intimidating and complex financial aspects of retirement that they never consider what their retirement goals, priorities, and lifestyle should be.

“The biggest thing people miss is goal setting and lifestyle for retirement,” Mr. Cruz said. “In retirement, you still have to figure out what’s really important to you. “And people aren’t having the same conversations.”

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