Your Year-End Retirement Planning Checklist

Your Year-End Retirement Planning Checklist

As the holidays approach, we tend to get wrapped up in making plans with our family and friends but the holiday season also means the end of the year, a good time to check if your retirement planning goals are on track.

The last day of the calendar year is the contribution/distribution deadline for many retirement accounts, so planning in advance could help you avoid higher taxes with last minute deposits or withdrawals. Here are a few moves to help you maximize your investments and minimize your expenses as we get ready to celebrate the New Year.

  1. Review Your Retirement Goals—To reach your retirement goals, you need a specific plan for effective savings. December is the perfect time for an annual reassessment of your retirement planning goals.  Add up the retirement savings you expect to have by the time you reach retirement (such as 401(k)s, 403(b)s, IRAs, and personal savings and investments) and divide the total by the number of years you expect to live in retirement to determine the savings you will have to draw upon each year.  We suggest you use online calculators tools available on most vendor sites.  Both Christian Brothers Services and Vanguard provide such tools for its participants.
  2. Take stock of your Assets and Liabilities—Make a list of all your assets, including cash, real estate, vehicles, personal property, bonds, stocks and investments. Keeping track of your capital will help you plan around your income sources during retirement. Create another list with all liabilities, such as mortgages, auto loans, student loans, personal loans and credit card debt.
  3. Pay off Debt—Paying off your debts is one of the most important steps before retirement because your savings and retirement income will last much longer if you don’t have to make monthly payments toward your debt.
  4. Estimate Your Retirement Expenses–Create a budget for early, middle and late retirement, taking into consideration different expenses for each stage. For a rough estimate of your future expenses in retirement, a general rule of thumb is to multiply your current income by 70–90 %.
  5. Contribute to Your IRA and 403(b)/401k–-Even if you make IRA and 403(b)/401(k) contributions every year, you may not be contributing enough to reach your retirement saving goals. Max out your annual contributions so you can enjoy the full tax savings and benefits. Time is your biggest ally in terms of retirement planning; compound interest and tax-deferred gains can help your investments grow tremendously.
  6. Make catch-up contributions—Catch-up contributions allow people age 50 or older to make additional deferrals to their 401(k)s, 403(b)s and Individual Retirement Accounts (IRAs) after they reach annual contribution limits set by the IRS. The 2019 catch-up contribution amount for 401(k) and 403(b) plans is $6,000. If you have an IRA, you can make an additional catch-up contribution of $1,000 to it. 
  7. Take Your Required Minimum Distributions (RMDs)—Your required minimum distribution (RMD) is the minimum amount you must withdraw from your account each year. You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account when you reach age 70½. Roth IRAs do not require withdrawals until after the death of the owner.
  8. Plan ahead for healthcare expenses—While Medicare will cover many of your healthcare costs in retirement, it doesn’t pay for a lot of things seniors need and it has high coinsurance costs. Invest in a health savings account (HSA) if you have a qualifying high-deductible health insurance plan. If this doesn’t apply to you, earmark some of your retirement plan funds for healthcare needs or open a separate retirement account that will serve as your healthcare fund.

As the year comes to a close, make your resolution to plan ahead and make your retirement dreams a reality.

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