While saving is a fruitful habit to cultivate early in your career, the last 10 to 15 years before you are set to retire are especially important.
With timely retirement planning you will have a clearer idea of your financial goals and have adequate time to make any needed adjustments.
Consider these six useful retirement planning moves to optimize your savings and ensure financial independence throughout your golden years.
Pay down your debts as much as possible
Getting rid of any lingering mortgage, car loan, or student loan debt you might still have is one of the best planning moves you can make in your 50s.
Try to create a prudent repayment plan that can provide you true financial freedom during your retirement years.
Approach investments conservatively
Apply the time-honored conventional financial approach by investing more conservatively as you near your retirement.
Move away with caution from stocks while placing more money into bonds. In a prolonged bear market you may not have enough time to recoup losses before you retire.
You will need to sit down with a financial professional and decide your level of exposure to the markets, and how you can start reducing it. There may not be any harm in remaining diversified but in a manner that is age-appropriate.
Maximize your 401(k)
If you are not already funding your 401(k) to the max, it is not too late to start doing so. Your 50s and early 60s are most likely to be your best earning years, placing you in a higher tax bracket than during your retirement.
You will pay taxes on the income now if you choose a Roth 401(k) offered by your employer, but can make tax-free withdrawals later.
Putting away a little extra throughout your last active decade before you retire will make a huge difference to your retirement savings.
Add an IRA
An individual retirement account is an investment option if you do not have a 401(k) or have already maximized investing in one. The two types of IRAs are traditional and Roth.
In a traditional IRA your contribution is tax-deductible upfront, while a Roth IRA gives you the benefit of tax-free withdrawals later. The maximum contribution you can make to an IRA is $6,000, plus another $1,000 if you are over the age of 50.
Plan your Social Security
An important decision you must make is to put together a plan about drawing your social security benefits. You must consult with a retirement financial advisor and take into account various factors, such as health, life expectancy, tax-advantaged retirement accounts, and required minimum distributions (RMDs).
Review your estate plan
Review your estate plan to ensure your will and other documents are still relevant and your beneficiaries are up-to-date. You must also review power of attorney, healthcare directive, and other documents, to check for any outdated information.
Similarly, review your life insurance policies. Keep an eye out for any expiring term policy and the need to renew.
Take into consideration dependents that might rely on your financial support while you finalize your estate planning.