07 August 2014
Prepping for Retirement: Last-Minute Tips for Senior Employees

If retirement is just a few years away, it’s time to get your investments in shape to handle this exciting, new phase of your life.

What should you do when retirement is just a few years off? Here are some tips to help you enjoy a brighter, more secure future – a future you’ve planned for.

1. Take full advantage of company matching retirement funds. If you have a work-based 401(k) with an employer that matches a portion of the funds you stash in this tax-sheltered investment, max out your annual contributions in the five to 10 years before your intended retirement date.

If you don’t contribute the maximum each year, you’re passing up “free money” according to the Securities and Exchange Commission (SEC)*, and with retirement looming, free money is a gift you may not want to pass up.

2. Calculate how much you’ll need for your retirement. Factor in inflation, a contingency account for medical expenses, home maintenance and other routine living expenses. Knowing how much you’ll need and how much you have will help you play catch up quickly by contributing more while working the last few years before retirement.

There are numerous retirement calculators to help determine how much you’ll need to invest to maintain your current lifestyle. Use these calculators to arrive at the amount you’ll need to keep living the life you choose after you retire.

3. Consider moving to a state with a lower tax burden and lots of things to do. If you live in a high-tax state – a state with an income tax, a high sales tax, property taxes and other required payments, your investment money may not go as far as you think. Cost of living is lower in some places and higher in others. Ready for your latest adventure? Consider selling the homestead, cashing out the equity and moving to a location with a lower cost of living.

4. Automate your savings. Ask your employer to deduct your retirement plan contribution directly from your paycheck. It eliminates the need to summon up the self-discipline needed to load up on retirement savings in the last few years of work, creating a more substantial nest egg that’ll last longer when you no longer receive a salary.

5. Plan for big ticket items while you’re still employed. If you know the house needs a $10,000 roof repair, or that you’re facing tuition bills that can bust a budget, plan for large expenses in the years leading up to retirement.

Get the mechanical systems in your home updated, and make sure your home is sound and solid, whether you plan to sell and move or stay put in the family home. It may be easier to pay for these big-ticket items while you’re still earning a paycheck.

6. Practice retirement. Develop an estimate of monthly retirement expenses and try to live on that amount for a few months. If you can’t get through the month without drawing down your invested principal, increase contributions to every tax-sheltered retirement plan available, including an individual retirement account (IRA) and a Health Savings Account (HSA) that enables you to save tax-sheltered cash to use for unexpected medical expenses.

An HSA can also lower insurance premiums by allowing you to increase your health insurance or gap deductibles. Look into health care options in the years before you retire and plan ahead with a practice run at retirement.

7. Lower the cost of investing. If you use a broker to manage your retirement assets, the brokerage takes a percentage of your portfolio each year for services rendered. It may be 1%, 2%, or more, and while it may not sound like a lot, high investment fees can nibble away at your retirement savings.

Your local bank, some mutual fund families, certain insurers and other financial institutions often offer a lower fee structure, keeping more money working for you in your retirement accounts. Contact your bank representative to discuss investment options and fees.

You have time. Retirement is still a few years off, but it’s coming, and you want to enjoy it. Start planning for a more secure future several years before you actually clock out for the last time.

Plan for emergencies, max out every tax-sheltered savings option available, lower the cost of investing, and see how well you and your family get by with a practice run at retirement.

Make your Golden Years shine more brightly with careful planning in the years leading up to a secure retirement.



The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.


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