October 12, 2024
Closing in on retirement? Allworth financial advisor Lynda Tu shares how focusing on a few essential areas can help ease the transition.
As we embark on what many are calling the “Great Retirement” era, an unprecedented wave of individuals is approaching retirement age. With tens of thousands of baby boomers turning 65 every day1, this demographic shift is significant. By 2030, the entire baby boomer generation will have reached retirement age1. For many, this transition is not just a milestone—it’s a major life shift that involves a lot of careful planning.
As you move closer to retirement, it’s natural to experience feelings of financial stress and uncertainty. But the good news is that this transition can be smooth and even exciting, as long as you have the right strategies in place. With the right information and planning, you can turn retirement uncertainty into confidence and peace of mind.
Here are five key areas to focus on as you prepare for retirement:
Let’s start with the basics: the closer you get to retirement, the more important it is to take full advantage of your savings opportunities. If you’re 50 or older, the IRS allows you to make catch-up contributions to your retirement accounts, which can significantly boost your savings.
For 2024, you can contribute an extra $7,500 to your 401(k)2. Starting in 2025, employees aged 60 to 63 will be able to make even larger catch-up contributions of $10,000 or 150% of the 2024 catch-up amount, whichever is greater2. And starting in 2026, those making more than $145,000 annually will need to make catch-up contributions as Roth contributions. Now is the time to maximize your retirement savings and ensure you’re fully prepared for the years ahead.
Healthcare costs are one of the biggest concerns for retirees, but many people haven’t saved enough to cover these expenses. If you have a high-deductible health plan (HDHP), pairing it with a Health Savings Account (HSA) is a powerful way to save for future healthcare expenses.
HSAs provide a triple-tax advantage:
• Contributions are pre-tax
• Any investment earnings grow tax-deferred
• Withdrawals for qualified medical expenses are tax-free
After age 65, you can even withdraw HSA funds for any purpose without penalty3, although non-medical withdrawals may be taxable. This makes an HSA a valuable tool not only for healthcare costs but also as a supplemental retirement savings vehicle.
The closer you get to retirement, the more important it is to stay informed and educated about your options. Whether through online resources, webinars, or speaking with a financial advisor, taking the time to learn about budgeting, saving, and investing can have a significant impact on your retirement readiness.
Studies have shown that participating in financial wellness programs—like budgeting webinars or retirement planning sessions—can lead to higher savings rates. In fact, after attending these kinds of sessions, some individuals increased their 401(k) contributions by an average of $649 to $9884. The more you learn, the more confident you’ll feel about your retirement strategy.
Navigating Social Security and Medicare can be confusing, but understanding these programs is key to optimizing your retirement income and healthcare coverage.
Recent estimates indicate that the Social Security Trust Fund reserves may be depleted by 2034, potentially leading to a reduction in benefits unless Congress acts. Because Social Security is one of the few guaranteed income sources available to retirees, it’s essential to know how to maximize your benefits.
As for Medicare, understanding when to sign up and how it coordinates with other healthcare plans is crucial. Don’t wait until the last minute—explore your options now to make the most informed decisions when the time comes.
If you’ve worked for multiple employers throughout your career, you might have left behind retirement accounts with various companies. Consolidating these accounts can give you a clearer picture of your total savings and help you better manage your investments.
By rolling these accounts into one plan, you can simplify your financial life and potentially reduce fees. Consolidation can also help ensure your investment strategy is aligned with current retirement goals.
As you approach retirement, remember that you don’t have to navigate this journey alone. By educating yourself, maximizing your savings, and working with a trusted advisor, you can confidently transition into this next phase of life. The key is to take action now—whether that’s consolidating accounts, optimizing your Social Security, or simply making catch-up contributions. The more proactive you are, the less stressful and more fulfilling your retirement will be.
If you’re ready to take control of your retirement planning, reach out today for personalized advice and support. Together, we can help you turn your retirement dreams into reality.
After my family left Vietnam, to start from scratch in America, my parents were very conscientious about what they spent money on. However, they always prioritized helping my brother and me, while putting their own needs on the back burner. In their unspoken gestures of sacrifice and giving to others, I discovered my own sense of what it means to serve others. A commitment that I continue to hold close to my heart, as I work to help my clients regain their time, feel well cared for, and ultimately experience the peace of mind they deserve.
1. https://www.census.gov/library/stories/2019/12/by-2030-all-baby-boomers-will-be-age-65-or-older.html
2. https://www.kiplinger.com/retirement/iras/changes-coming-to-iras-next-year
3. https://www.kiplinger.com/article/retirement/t037-c001-s003-making-the-most-of-a-health-savings-account-age-65.html
4. https://www.ebri.org/publications/research-publications/issue-briefs/content/field-of-dreams-measuring-the-impact-of-financial-wellbeing-initiatives-on-401(k)-plan-utilization
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