Have you been thinking about the day when you can retire? Will you be ready? Whether you are just starting out in the workforce or are only a few years away from retirement, the sooner you begin planning for it, the more you will be able to relax and enjoy it. There are many challenges you will be faced with as you develop your plan. Here are five major ones you need to consider now.
- Maximizing your IRA contribution may reduce your 2014 Tax Bill: If you haven’t already maximized your IRA contributions, now is the time. Whether you fund a Roth or Traditional IRA, you have until April 15th to make a contribution to be applied to 2014. For 2014, the maximum contribution amount is $5,500. If you’re 50 or older, an additional catch-up contribution of $1,000 is allowed. Just make sure to check the rules for deductible IRA contributions and consult with your tax professional.
- Consider rolling over a 401k if you’ve changed jobs: If you have changed jobs or retired and left a 401k behind, now may be a good time to consider a direct rollover. By consolidating all of your retirement dollars in one place, you often have more flexible investment options and greater control over your accounts. With a “direct rollover,” the money goes directly from your former employer’s retirement plan to an IRA. When done correctly, this option will allow you to continue your tax-deferral until retirement. Make sure to talk to your former employee’s benefit coordinator or a Financial Consultant before making any decisions to ensure you know all of your options and to confirm your rollover is handled properly.
- Determine how much income you will need after you retire: With so much at stake when planning a retirement income stream, it’s important to consider the major challenges most retirees face. Not only does your retirement account need to outpace inflation, you need to consider market fluctuations, Social Security uncertainty, healthcare risks and often the needs of your children or aging parents. While all of this may seem overwhelming, there are many sound strategies you can employ to pursue the retirement of your dreams. If you are still pre-retirement, you can look for ways to increase your monthly savings through greater contributions to your employee plan or IRA. During retirement, you can look for ways to cut spending, reduce debt or lower your withdrawal rate to ensure your money will last longer. Other options include taking a portion of your money and putting it in an investment that will create an income stream for life. It’s important to meet with a Financial Consultant before making any decisions to learn about your options and the possible risks of any investment.
- Keep rising healthcare and insurance costs in mind: The Employee Benefit Research Institute has estimated that if recent trends continue, a typical retiree who is age 65 now and lives to age 90 will need to allocate about $180,000 of his or her nest egg just for medical costs, including premiums for Medicare and “Medigap” insurance to supplement Medicare. Because of the higher cost trends affecting private health insurance, the same retiree relying on insurance coverage from a former employer may need to allot nearly $300,000 to pay health insurance and Medicare premiums, as well as out-of pocket medical bills. Keeping the high cost of medical care in mind when planning for retirement is essential. Along with proper planning, there are several strategies available that can help cover health care costs or long term care needs. If someone you care for depends on your income, you also may want to consider life insurance. Consider talking with one of our team members to discuss the options available today that will help protect your retirement future.
- Make sure your plan is diversified to allow for market fluctuations: What is happening in the market when you retire can be a key factor in your retirement income. For those that retire in a down year, their income can be negatively impacted. For others, a strong market year can give their retirement dollars a much needed boost. While not much can be done in terms of controlling the market when you retire, having a plan in place that takes market fluctuations into account and incorporates the appropriate risk based on retirement needs can make a huge difference. While diversification doesn’t prevent market loss, reviewing and rebalancing your portfolio often and determining if changes are necessary to keep you on track are an important part of any retirement plan. Also making sure you budget carefully, monitor income and expenses frequently, and take action whenever you see significant changes in income and expenses can be key. Meeting with a Financial Consultant for a quarterly or annual review can also help keep your retirement on track.
Planning is crucial when it comes to pursuing your retirement goals. Whether you are concerned about retirement income, rolling over a 401k or looking for strategic guidance on your investments our South State Investment Consultants can help. Our specialized, local team will take the time to understand your unique financial situation and develop a personalized plan tailored to your retirement vision. Call 800-382-0564 or stop by your local South State branch to schedule a meeting. Helping you plan for what matters most is at the core of what we do. That’s the South State Way.