Broker Check


December 24, 2020

As the new year approaches it is important to prioritize your retirement savings goals. In the beginning of 2020, a survey from the Employee Benefit Research Institute found 61% of U.S. workers said that retirement planning makes them feel stressed... and this was before the pandemic! It's likely that this percentage rose throughout the year, perhaps even substantially. If you find yourself among those feeling stressed heading into the new year, these tips may help you focus and enhance your retirement savings strategy in 2021.

#1 Increase Your Automatic Savings Rate - Review the election you have in your employer-sponsored retirement plan. If you can increase it by 1% that will help put you on the path to increased savings and chances are you won't miss such a small reduction in your paycheck. Another option if money tight is to wait for a raise, this is "new" money that you are not accustomed to spending, so as soon as you get a raise remember to increase your retirement savings before you start increasing your lifestyle.

#2 Review Your Tax Situation - Retirement savings plans and IRAs not only help you accumulate savings but they also have a tax benefit. A traditional (non-Roth) retirement savings plan reduces the amount of your current taxable income. While a Roth does not give you a current tax benefit, the money within the plan will grow and be available tax-free to you in retirement. Reviewing your tax situation can give you insight into which savings strategy will benefit you the most.

#3 Rebalance - In a properly diversified portfolio not every asset class will move together causing your target asset allocation to shift toward a more aggressive or conservative profile than is appropriate for your circumstances. Check to see if your account can be rebalanced automatically so that it stays consistent for your risk tolerance. If not, you should review it to perform the rebalance for yourself. You can do this by selling shares in the overweight asset classes and shifting the proceeds to the underweight ones. If doing so in a taxable account make sure you take into consideration tax liability before making trades.

#4 Understand All Your Plan's Features - Work-based retirement plans can vary from employer to employer. How familiar are you with your plan's specific features? Are you fully taking advantage of any match the employer provides? Are company contributions and earnings subject to a vesting schedule and if so, do you understand the parameters? Under what circumstances might you access the money? Can you make after-tax contributions into your plan allowing you to contribute beyond the normal limits? Review your plan's Summary Plan Description to ensure you take maximum advantage of all your plan has to offer.

If we can be of assistance to you in this retirement planning process, simply give us a call. Or better yet you can directly schedule a time to talk with us by utilizing our Calendly scheduling tool by clicking here.