Are You Financially Prepared To Retire?
Whether you’re decades away from retirement or closing in on the end of your working years, it’s important to make sure you’re on track to achieve your savings goals. Performing an annual checkup on your retirement accounts is one of the best steps you can take toward peace of mind and preparedness. Read on to learn about the key elements of an effective yearly retirement review.
Assess your progress
If you’ve already set goals for when you want to retire, how much income you’ll need, and the amount you’ll need to save, it’s a good idea to review these annually. And if you haven’t gotten around to setting retirement-savings goals yet, now is an excellent time to start. You can use an online retirement savings calculator to confirm that you’re on pace to reach your objectives. Your 401(k) account’s online portal may also have tools to help you do this. Writing for Next Avenue, financial writer Kerry Hannon recommends that you also check estimates for any Social Security and pension income that you’ll be receiving for retirement.
Consider your contributions
Assessing — and perhaps increasing — your retirement contributions is an essential part of any annual review. In an article for Kiplinger, personal-finance author Kimberly Lankford points out a couple of ways you can go about this. First, you may want to consider raising your regular contributions, especially if you’re not meeting your savings goals or if your employer offers 401(k) matching. If you’re 50 or older, you can also make a catch-up 401(k) contribution of up to $6,500 for 2021 in addition to the regular annual limit of $19,500.
Check your investment allocations
Are your investments allocated in a way that matches your goals and aligns with how close you are to retirement? Your annual retirement review is the perfect time to make sure your portfolio strikes the right balance between stocks and bonds. The closer you get to your retirement date, the more you’ll want to trade higher-risk, higher-reward stock investments for the stability of bonds. You may even be able to choose a target-date plan that automatically allocates your investments more conservatively as you approach retirement. If your plan allows you to pick and choose among individual investment funds, Lankford notes that you may also want to switch from less-successful ones to higher-performing ones.
Review your beneficiaries
Have you designated the beneficiary for your retirement savings? Your annual review is a good opportunity to make sure that you’ve done this — and that the paperwork is up to date, especially if you’ve recently been married, divorced, or widowed. If you’re married, your 401(k) beneficiary is automatically your spouse. Both of you will need to sign a waiver form if you’d like the beneficiary to be someone else.
Evaluate your overall financial health
A financially secure retirement depends on more than just your 401(k) or other accounts. Hannon warns that high-interest debts can be especially burdensome to carry with you into retirement. In addition to reviewing your savings goals, use your annual retirement checkup to devise a plan for paying down credit cards, car loans, and any other debts that could threaten your retirement nest egg.
As you work toward the retirement you want, taking these steps as part of an annual checkup will help bring you closer to your financial goals.
Police FCU Resources
Police FCU has several options to assist you in your financial planning for retirement. Visit our Individual Retirement Account (IRA) page and our Investments and Insurance page for useful resources or call 301.817-1200 and a Member Services Representative will be happy to assist you.
Published by Police FCU
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