{"id":8177,"date":"2020-03-15T12:05:33","date_gmt":"2020-03-15T16:05:33","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=8177"},"modified":"2020-03-15T12:07:41","modified_gmt":"2020-03-15T16:07:41","slug":"best-ways-to-plan-your-retirement-annually","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=8177","title":{"rendered":"Best Ways to Plan Your Retirement Annually"},"content":{"rendered":"
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\"\"<\/a>Who isn\u2019t thinking about their retirement accounts these days? It\u2019s been a whipsaw of a ride for 401(k)s, Individual Retirement Accounts (IRAs) and other retirement funds lately. Stock and bond markets have been wild due to the coronavirus\u2019 impact on the global economy. My advice: Don\u2019t overreact, but do use this as a time for an annual assessment of your retirement planning.<\/p>\n

Markets go up and down, and if you\u2019re in your 50s or 60s, you still likely have years ahead of working and earning an income. So, the market swings shouldn\u2019t cause you great alarm (though they\u2019re no fun).<\/p>\n

I get the anxiety. It\u2019s tempting to make swift changes to your portfolio in turbulent times. But hold your horses. It\u2019s best to instead intentionally and pragmatically adjust your retirement planning as part of an annual routine. That way, you\u2019ll stay focused on the long game.<\/p>\n

Reading your Social Security statement can prompt you about how much you need to save for retirement and help you begin figuring out when to start claiming Social Security benefits.\u00a0<\/strong><\/p><\/blockquote>\n

5 Tips for an Annual Retirement Planning Checkup<\/h3>\n

Here are my five recommendations for an annual retirement-planning checkup:<\/p>\n

1. Rebalance your retirement accounts<\/strong>. Financial advisers generally suggest\u00a0rebalancing<\/a>\u00a0(that is, adjusting the mix of your stocks and bonds) whenever your portfolio gets more than 7 to 10% away from your original asset allocation matching your risk tolerance and goals.<\/p>\n

Read on Next Avenue<\/a><\/strong><\/p>\n

One rule many financial planners use for determining what percentage of your portfolio should be in stocks: subtract your age from 110. So, a 60-year-old would have 50% in stocks and the rest in bonds and cash.<\/p>\n

Taking a look under the hood once a year (not every time the market swings) is a technique that generally keeps your portfolio on course, so it doesn\u2019t get weighted down in one sector. The aim is to always spread your investments across a\u00a0range of asset classes<\/a>, from large companies and dividend-paying stocks to emerging-growth firms to global stocks and bond-fund indexes.<\/p>\n

2. Get estimates of your future Social Security and pension benefits.<\/strong>\u00a0Go to Social Security\u2019s website,\u00a0SSA.gov<\/a>, to open your\u00a0\u201cmy Social Security\u201d account<\/a>, if you haven\u2019t already. (If you already have an account there \u2014 good for you!) Use the calculator on the site to help estimate your future Social Security benefits and to see a record of your lifetime earnings history.<\/p>\n

Reading your Social Security statement can prompt you about how much you need to save for retirement and help you begin figuring out when to start claiming Social Security benefits.\u00a0<\/strong><\/p>\n

If you work for an employer that offers a pension plan, or have in the past, check with a human resources person there to determine the status of your benefit and any vesting, or payout, rules. You\u2019ll likely be able to learn how much your pension benefit would be if you started taking it at various ages.<\/p>\n

And if you\u2019re still working at the employer that will provide a pension, see if it offers\u00a0phased retirement<\/a>\u00a0\u2014 which could let you gradually reduce your work hours \u2014 and what effect taking it would have on your pension benefit.<\/p>\n

3. Assess when, how and if you plan to retire.<\/strong>\u00a0Many of us want to keep\u00a0working beyond a traditional retirement age<\/a>\u00a0for the mental engagement as well as the money. You might be thinking of retiring from a primary career and launching an encore one or even starting a business.<\/p>\n

Once a year, think through your plans.<\/p>\n

The added income from working longer can relieve financial anxiety about outliving your money. After all, the more earning years you have to build savings in a retirement plan like a 401(k) or an IRA, the better off you\u2019ll be down the road.<\/p>\n

Your monthly Social Security benefit may grow, too. You could have more earning years for the formula calculating how much you\u2019ll receive. And delaying\u00a0when you start claiming Social Security<\/a>\u00a0increases the benefit 8% a year from your Full Retirement Age until age 70. Plus, working longer lets you delay tapping retirement funds, which can continue to grow, and help pay for health insurance.<\/p>\n

Some excellent books that can help you get started pondering what you might want to pivot to for bonus working years:\u00a0The Encore Career Handbook,<\/a> Second Act Careers<\/a>,<\/em>\u00a0Purpose and a Paycheck<\/em> <\/a>, Repurpose Your Career<\/a>,<\/em> and (shameless plug for one of mine)\u00a0<\/a>Great Jobs for Everyone 50+<\/a>.<\/em><\/p>\n

4. Create, or update, a retirement spending budget and a retirement income plan.\u00a0<\/strong>Estimating your\u00a0annual retirement expenses\u00a0<\/a>and matching those against money you expect will be coming in is worth penciling out sooner rather than later.<\/p>\n

For the expenses side of the ledger, write down your current recurring fixed expenses, such as your mortgage or rent payment, health insurance premiums, utilities and so forth. Then increase for inflation any that could rise by the time you retire. This exercise will provide a retirement spending guide, although some of the expenses may drop if you\u2019ll relocate or when you enroll in Medicare at 65 or pay off a mortgage.<\/p>\n

Some new expenses will crop up in retirement, though. For example, travel outlays, gifts for grandchildren, lifetime-learning tuition and spending on hobbies. So add in ballpark figures for these or other costs you expect to incur.<\/p>\n

Then, for the income side, make a list of how much you expect to receive (and when) from: pensions, employer-sponsored retirement-savings plan and tax-deferred retirement accounts, as well as from Social Security and investments outside retirement plans.<\/p>\n

5. Pay down debts.<\/strong>\u00a0Finally, if possible, use your annual retirement-planning review to reduce or eliminate high-interest credit card payments, college loans and auto loans.<\/p>\n

Debt can be a real dream killer in retirement. So, the earlier you start to get a grip on this, the more you\u2019ll be able to enjoy retirement.<\/p>\n

By\u00a0Kerry Hannon <\/a><\/span>Entrepreneurship and Personal Finance Expert<\/span><\/p>\n

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\"Kerry<\/div>\n

By\u00a0Kerry Hannon<\/a><\/span><\/p>\n

Kerry Hannon is the author of\u00a0Never Too Old to Get Rich: The Entrepreneur’s Guide to Starting a Business Mid-Life<\/em><\/a>. She\u00a0 has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among other publications. She is the author of a dozen books including\u00a0Money Confidence: Really Smart Financial Moves for Newly Single Women<\/em><\/a>\u00a0and\u00a0What’s Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond<\/em><\/a>. Her website is\u00a0kerryhannon.com<\/a>. Follow her on Twitter\u00a0@kerryhannon<\/a>.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
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