Even if you love the work you’re doing, there’s no denying the fact that retirement is a major milestone and cause for celebration. It can open a lot of new doors because you’ll have more time to do the things you enjoy most. (And hopefully that includes getting some well-deserved rest and relaxation!)
Of course, you have to get the timing right. If you have hopes for an early retirement but don’t have a solid plan in place, then you’ll be in a tight spot. On the other hand, creating a realistic strategy can help you reach your goals in a responsible way.
Keep Reviewing Your Retirement Accounts
Regular check-ins with how your retirement accounts are performing is often the difference between a happy retirement date and disappointment. That shouldn’t come as a surprise. Being consistent with your contributions over the years is meant to pay off in the long run. But when you’re looking to retire sooner rather than later, it’s time to bump up those investments.
Taking advantage of your retirement accounts’ catch-up provisions can help get you where you want to be. For example, if you’re age 50 or older, the limits for your 401(k) in 2020 go from $19,500 to $26,000. You can add in another $1,000 for your Traditional and Roth IRAs if you’re over 50 this year too. Maximizing these accounts gives you a smart tax advantage. It’s definitely worth talking with your financial advisor about these options.
Think About Future Tax Strategies
Part of planning for retirement also means you’re thinking through how you’ll manage taxes during your retirement. Your strategy needs to consider both before- and after-retirement scenarios. One area of confusion might be with your Roth IRA and Roth 401(k) accounts. Since you’ve invested after-tax money here, you should know whether or not you’ll be able to follow the withdrawal rules to hold on to your tax-free earnings. This can get confusing quickly. But a Roth IRA is still a good possibility whenever we anticipate that tax rates will increase.
Additionally, it can be helpful to think about where you’ll be living during retirement. Different states will have different income tax rules. If your retirement plan hasn’t worked in those costs yet, you’ll want to check the math. Make sure you’ll still be able to have the lifestyle you want without an extra strain on your budget.
Get Help Running the Numbers
The future is always uncertain, but mapping out a plan can always help provide some clarity. The right professionals will make an effort to remind you of various scenarios that might cause you financial stress, as well as help offer you reassurance that you’re headed down the right path with your retirement goals.
Including tax planning as part of your process can also make a big difference. Being able to consult with a team of experts lets you gain new insights and have more peace of mind. If you’d like to schedule a time to talk with our team at NSO and Company, we’d love to see how we can help. Feel free to give us a call at (317) 588-3131 so we can get in touch!