January is almost over. Have you had your retirement review?


Crash diets have collapsed, new budgets won’t budge, and your Peloton is now the most expensive clothesline in the world. But even if every one of your New Year’s resolutions is over, there’s still one start-of-the-year task you’d be wise to tackle: reviewing your retirement.

This is a perfect time to take stock of where your retirement is headed, whether you’re still at work or have stopped working and are now collecting Social Security, financial planners say. It gives you a full year of investment returns and personal expenses to review, as well as a momentarily new perspective on how you want to spend the last phase of your life and the costs that come with it.

One study, from the Journal of Clinical Psychology, estimates that about 116 million American adults make New Year’s resolutions each January, but that more than half will abandon them within six months. At the same time, about four million people are expected to turn 65 this year, according to an analysis of census data by the Alliance for Lifetime Income, a nonprofit research arm of the annuity industry. Almost all of them will need to be maintained for decades.

Whether you’re still working or already retired, reviewing your retirement plan and how it’s shaping up compared to reality is a crucial step, said Michael Crews, author of the book “Saturday Everyday” and CEO of North Texas Wealth Management in Allen. Texas.

“Most people have never been retired, and if they’ve never been retired, the learning curve is steep,” Crews said. “People think the goal is to reach retirement, but that’s only half the goal. The goal is to reach retirement and not run out of money.”

Here are some main areas you’ll want to check out.

January is a good time to gather your annual credit card reports, as well as tax documents, any Form 1099 notices for self-employed and self-employed workers, and, if you are paid a salary, your last pay stub of the year. This allows you to see what your after-tax income is and how much you’re spending, said Bill Dendy, president of Alicorn Investment Management in Dallas.

“This is the perfect month to calculate what you spend monthly and annually, so you can determine where your money goes each month,” Dendy said.

Those numbers are the key to planning the income you’ll need in retirement and, once you’ve stopped working, determining whether your expenses are in line with your budget.

Common advice is that retirees only need about 80 percent of the income they had when they worked. But in the early years of retirement, people often make travel plans or make large purchases, like a boat or RV, and end up spending as much or more than they did when they were still working.

“With inflation, costs are higher and some people may realize that the number they budgeted as the perfect number for retirement is too low,” Dendy said.

Beyond reviewing the performance of your investments, it’s a good time to examine your asset allocation to make sure your money is diversified to avoid taking on too much risk. After a great year for stocks (the S&P 500 ended the year up 24.23 percent), investors will want to make sure their money isn’t too concentrated in stocks before a market downturn hits. They should also consider whether their investment mix carries an appropriate level of volatility and risk for those close to or in retirement.

“People wait to make adjustments until we have a major correction in the market, which is the worst time to make a change,” Dendy said, since that translates into real losses. “It’s fine when you’re 30, but when you’re 70, it’s a challenge.”

Investors who started with a properly diversified portfolio will also want to check whether they need to rebalance their holdings against their original investment plan. Some large brokerages offer automatic rebalancing that can be set up online.

Three to five years before you retire, consider different strategies for collecting Social Security, such as claiming spousal benefits, which can include claims against an ex-spouse’s benefits if you were married for at least 10 years. The age to collect all benefits is between 66 and 67 years for people born after 1954. For those who delay collecting benefits, the monthly amount increases 8 percent annually until age 70. Coordinating benefits with your spouse can be complicated. There are calculators online, including those on Social Security Administration websiteand some paid online services; A call to the agency or a financial planner can also help.

“You need someone who can crunch those numbers for you and discuss the pros and cons,” said Daphne Jordan, senior wealth advisor at Pioneer Wealth Management Group in Austin, Texas, and president of the National Association of Personal Financial Advisors. “People may also not know the logistics of Medicare and there may be a fine if you don’t sign up on time, whether you’re working or not.”

How you structure withdrawals from retirement accounts, when you collect pension payments and Social Security benefits, and whether you earn any income from work or other sources can have important consequences for your retirement. The bottom line is that the less you pay in taxes, the longer you can make your savings last.

Many would-be retirees don’t realize that about half of all Social Security beneficiaries pay taxes on their benefits and that earnings above a certain threshold can result in monthly Medicare surcharges that, at the highest income level , can bring a bonus at $594 a month. If you turn 73 this year, you’ll also face taxes on your required minimum distributions (the dreaded RMDs) from tax-deferred retirement accounts, including individual retirement accounts and 401(k)s.

Some retirees could benefit from receiving the tax hit that comes from transferring tax-deferred money in a traditional IRA or 401(k) to a Roth IRA, making all future withdrawals tax-free. Retirees under age 73 may want to delay Social Security and pension payments early in retirement to deplete IRAs and other accounts before RMDs take effect. Yet another strategy is to send RMD payments directly to charities if they don’t need the proceeds, which can reduce your tax bill. In all cases, you will need to decide whether to have Social Security income tax, pension payments, and account withdrawals withheld or to make quarterly estimated tax payments.

Bottom line: If you think taxes are complicated when you work, wait until you retire.

“It’s important for someone to calculate their tax projections before they start withdrawing money from their accounts,” Ms. Jordan said. “There will be tax considerations.”

During your working years, having a substantial amount of term life insurance—enough to pay off your mortgage and other debts and to support your loved ones for at least a year—is a prudent financial move. Once you and your partner are retired, that coverage may become unnecessary.

“Once you’re retired, the house can be paid off and there’s not the same level of loss of income if you die,” Dendy said. “But now it might make sense to convert a life insurance policy into a long-term care policy, although that won’t make sense for a single person. “Long-term care may make sense for a couple, but it’s a real shopping spree to get the best long-term coverage for your situation.”

Many single retirees can do without long-term care because they don’t risk spending all their assets and leaving their spouse nearly destitute. With long-term care costs exceeding $100,000 a year for those without Medicaid coverage, another option is to consider life insurance or annuities that offer that coverage as a rider. Some combat veterans may qualify for long-term care coverage under the Help and assistance benefits paid by the Department of Veterans Affairs, although the process of claiming those benefits can be complicated.

As you approach or enter retirement, it’s a good time to take a complete inventory of what you own, where those assets are kept, and how family or friends can find that information. In addition to bank and investment accounts, pensions, insurance policies, trusts, annuities, deeds, securities, and other documents, you will also need to compile a list of account usernames, websites, and passwords.

Taking photographs or videos of the contents of your home, including jewelry and other valuables, is a good way to catalog your assets. You will also need a durable power of attorney (to manage finances) and a health care power of attorney (to make medical decisions), a health care privacy document, end-of-life directives, an updated will, and trusts. appropriate. .

“It’s a good time to review your estate plan and verify the beneficiaries of your financial and retirement accounts, as well as your insurance policies,” Ms. Jordan said. For example, if an ex-spouse is still listed as a beneficiary on an old bank or work 401(k) account, that money goes directly to that person, even if she remarried. “If you’re older, this is a good time to think about whether your children know your estate plans and where all those documents are located.”

“People say, ‘I’m going to work forever,’ but what happens if you get diagnosed with something?” said Mr. Crews of North Texas Wealth Management. “That’s not having any plan.”

While many people can handle saving and investing for retirement during their working years, the myriad considerations around investing, taxes, healthcare, benefits, insurance, and more in retirement may be beyond the capabilities of even a successful DIY enthusiast. While not everyone needs a financial advisor to manage it, even an occasional meeting with a paid financial or retirement planner can be helpful.

Planners warn that people can become so focused on the daunting and complicated financial aspects of retirement that they never consider what their retirement goals, priorities, and lifestyle should be.

“The biggest thing people overlook is goal setting and retirement lifestyle,” Crews added. “When you retire, you still have to figure out what’s really important to you. And people just don’t have those conversations.”

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