If retirement is close at hand, you’re probably ready to start relaxing after years of working hard. However, there are still a few more details to take care of to make sure you’re well prepared for your future. Here are a few suggestions to help you count down to retirement.
Look closely at your portfolio’s asset allocation. As you near retirement, you may want to reduce your exposure to more volatile investments, such as stocks. However, consider keeping some of your retirement dollars allocated to stock funds or portfolios.
Since your retirement could last a long time, you may want some investments that have the potential to produce inflation-beating returns.
Well before your retirement date, consider your plan distribution options. Keep in mind that if you take a lump-sum payment, you’ll owe income taxes in the year you receive the distribution.* That will leave you with less money to spend and reinvest during retirement.
Instead, you may choose to roll over the distribution into an individual retirement account (IRA) to defer taxation. Or you may be able to keep your money in your existing plan account. Either way, withdrawing the money over time would spread out your tax liability. If you decide to roll a plan distribution into an IRA, consider having your money directly transferred by your plan to the IRA to avoid federal income-tax withholding.
Use the time between now and retirement to add to your retirement savings. If you’re age 50 or over, your employer’s plan may allow you to make extra “catch-up” contributions. If this opportunity is available to you, taking advantage of it may help you accumulate more money for your retirement. Your situation is unique, so be sure to consult a professional before taking action. * Qualified Roth distributions are not subject to federal income taxes.
Continuing to save even as you near retirement could help your account grow.
| Still Saving | Stopped Saving | |
| Account Value at Age 50 | $120,000 | $120,000 |
| Average Annual Total Return | 6% | 6% |
| Annual Amount Contributed From | ||
| Age 50 to 65 | $2,400 | $0 |
| Account Value at Age 65 | $343,449 | $287,587 |
This is a hypothetical example used for illustrative purposes only and does not represent any specific investment product. Annual compounding is assumed. Your investment performance will be different. Source: DST
