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Year-End Retirement Planning: 5 Smart Money Moves to Make Now

May 06, 2021

The year-end is a busy time for most people, but it is also the time to make important financial decisions regarding retirement planning that can help you enter the new year with financial confidence. If you have been slow to create your financial to-do list, the time to start is NOW.

Get started on your year-end financial checklist with these 5 smart money moves you should make right now.

1. Create a Plan

A good plan allows you to do the following:

  • Build a projection of your retirement income. You’ll get to know what your retirement income will be and what would be the source of this income – part-time work, social security, pension, RMDs, etc.
  • Project your expenses in retirement based on what lifestyle, healthcare and taxes would be your expenses in the future. 
  • Carefully think about Medicare and Social Security claiming strategies. You’ll need to figure when is the right time to claim these benefits.
  • Make smart decisions on things that are in your control, like savings, investing, when you want to retire, or where you want to live. These decisions can help you understand your options to manage risks that are not in your control, such as market returns, inflation, and longevity. 
  • Figure out various scenarios to explore. For example, what will happen if you take up a part-time job at 55, move abroad for a few years, retire at 60 vs 65, or do a series of Roth conversions to minimize taxes.

2. Maximize your retirement plan contributions

Making maximum contributions on retirement savings plans like 401ks and IRAs has the following benefits:

  • Boost the value of your retirement savings if your employer is matching your 401(k) contributions.
  • Build your retirement savings and enjoy the power of compound interest.
  • Defer paying taxes on the contribution amount.

However, both 401(k) and IRA retirement plans allow your investments to grow in a tax-deferred state. If you want to know which retirement plan is a profitable investment, you need to know the differences between Roth IRA vs 401(k).  


3. Review your health savings account 

Contributing the maximum to a health savings account offers the following benefits:

  • Pre-tax money is saved
  • Money grows tax-free
  • Money withdrawn isn’t taxed 

4. Rebalance your investment portfolio

Your near-perfect asset allocation strategy may require revision from time to time. Review your investment portfolio and rebalance your investments as required. When you rebalance your investments, you minimize the risk. Rebalancing involves selling and buying portions of your investment portfolio to maintain your original asset-allocation strategy and help you stick to your investment goals. 


5. Carry out a Roth conversion

When you transfer money from your traditional IRA into a Roth IRA, your money becomes a nontaxable wealth & income in retirement and reduces your RMDs by lowering the balances in your traditional IRAs.


In Conclusion

Most people tend to add financial planning to their list of new year resolutions. But with these retirement tips, you can take some early action that can help make your financial position stronger in the new year and beyond.

For more tips and information regarding retirement plans, contact us.

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About The Author

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He regularly writes for blogs at MoneyForLunch, Biggerpocket, SocialMediaToday, NuWireInvestor & his own blog for Self Directed Retirement Plans. If you need help and guidance with traditional or alternative investments, email him at rick@sdretirementplans.comor visit Self Directed Retirement Plans.

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