5 New Year’s Resolutions for the Almost Retired

The start of a new year is always a good time to check in on your finances.  Here are five resolutions to help you get on track if you’re thinking about retiring soon.

1) Think about what you want to do in retirement.  Do you want to travel the world? Do you want to turn a hobby into a small business? In my experience, the happiest retirees are the ones who had a clear picture about what they wanted to do once they retired.  Spend some time thinking about what you want to do when you have the time to do whatever you want.

2) Finally create a budget.  To successfully transition into retirement you need to know what you spend now and how that might change in retirement.  If you plan to travel more extensively in retirement you must accountant for that.  The same goes if you pay off your mortgage and are only responsible for taxes and insurance in the future.  Consider using an automated service like Mint.com or Quicken® to help determine your yearly expenses. Knowing your budget helps you determine if you are financially ready for retirement.

3) Review your potential income sources in retirement.  Go to www.ssa.gov to register for a username and password to review your Social Security benefits.  Pull any pension estimates from your current or past employers.  Add in any income you may earn from part-time work in retirement. Determine the value of your nest egg by adding together all your retirement and investment accounts.  If your savings totals 20-25 times the size of your current income you are probably in good shape.

4) Max out your 401k/403b/IRA contributions.  As you approach retirement it is likely you are at your highest earning years and once you retire you will fall to a lower tax bracket.  Now is an ideal time to max out contributions to retirement accounts to avoid paying taxes today and instead pay taxes in retirement at a potentially lower rate.  For 2015, those over age 50 can contribute up to $24,000/year to a 401k and/or up to $6,500/year to an IRA if they qualify.

5) Talk to a professional.  While you may have a good handle on your financial readiness, it may still be worthwhile to check in with a CERTIFIED FINANCIAL PLANNER™ professional.  Often a professional can identify holes in your financial plan that you weren’t aware of such as: 

·         Determining the most tax efficient withdrawal strategies after you retire which could save you thousands in taxes. 

·         Identifying potential risks in your portfolio that could jeopardize your retirement.

·         Determine the optimal strategy for claiming Social Security (very important for married couples!) 

A professional can help you answer many if not all of the questions you need to answer as you transition into retirement.