Setting the Stage for Your Retirement

Posted on Monday, June 18, 2018

Are you counting down the years to retirement? Whether the big day is imminent, in the distant future, or somewhere in between, you must lay a foundation for a comfortable lifestyle. Obviously, if you're just getting started on a career, you've got your work cut out for you. But even soon-to-be retirees who have been saving diligently for years must put the finishing touches on their plans.

5-4-3-2-1 Retirement Blastoff

Heed these tips as you count down year-to-year.

5: Start thinking about where you will live after you retire. If you are interested in moving, start searching now for your retirement location. Plan to maximize the tax benefits under the home sale exclusion. If you meet the other requirements, you can generally elect to exclude from federal tax the first $250,000 of gain or $500,000 if you're married.

4: Obtain an estimate of the Social Security benefits you will receive in retirement. If you expect to keep working part-time, be aware that you may forfeit some of these benefits. The Social Security Administration has calculators to estimate potential benefit amounts using expected retirement dates and earnings. Click here to access them.

3: Take a serious crack at budgeting for retirement. Don't forget to balance the expected reduction in expenses (on items like work clothing, taxes and housing costs) against other pursuits such as travel.

2: Fine-tune your investment portfolio as you approach the red-letter day. Make adjustments based on estimates of income and expenses during your retirement years.

1: Figure out if it would be better to take a lump-sum payment from your retirement plan, arrange periodic payments, or roll over funds to an IRA.

Here's a rundown of the various stages of life:

Stage one (age 35 and younger)

While you're in your prime working years, try to maximize contributions to qualified retirement plans. For example, you may defer part of your salary to a 401(k) plan, especially if your employer provides matching contributions. Similarly, if possible, contribute to a traditional IRA or Roth IRA - or both.

Stage two (age 36 to 50)  

During the second stage, you might focus on growth investments which have historically produced relatively high returns. Note, however, that past performance is no guarantee of future results. Also, growth investments such as stocks are subject to market risk, which causes the value to fluctuate. Reminder: Use diversification and asset allocation judiciously. Review your investments periodically to ensure you are meeting your long-term objectives.

Stage three (age 51 to 60)

If you haven't yet generated enough cash in your retirement plans, now is the time to beef up contributions. This may be easier to do in this stage if you've paid off huge expenses like your home mortgage or your children's college educations. Also, those who have been emphasizing growth investments might want to "pull in the reins." Instead, you can allocate a bigger part of your portfolio to fixed income investments.

Stage four (older than age 60) 

Finally, you're heading down the home stretch. Consider such issues as where you expect to live in retirement, how to protect against health care catastrophes and ways to tweak your investment plans to maximize the benefits.

If you've stuck to your guns all these years, you should be in pretty good shape. Nevertheless, keep on planning right up until the very day you retire and consult with your financial adviser along the way.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.