• Planning for Health Care Expenses in Retirement

    By: Elaine Floyd, CFP®

    Customized Strategies for Your Financial Security

    Nearly everyone agrees on the importance of planning for health care expenses in retirement. However, this task can feel overwhelming due to the many unknowns: the future cost of health care, your personal health care needs based on past experiences, your individual life expectancy (which determines how long premiums must be paid), and the potential need for long-term care—the most dreaded possibility for many.

    Fidelity has popularized the idea of starting retirement with a lump sum to cover health care costs throughout your lifetime. Their latest estimate suggests that a 65-year-old retiring this year will spend an average of $165,000 on health care expenses and medical expenses during retirement. However, because no one is truly “average,” Fidelity also provides a tool that allows you to personalize this figure by inputting your current age, retirement age, and life expectancy. For example, if you plan to retire at 68 and have a life expectancy of 93, today’s 65-year-old couple would need $392,786 at the start of retirement to fund lifetime health care expenses.

    The advantage of such tools is their flexibility; you can see how changes to basic assumptions affect the estimate. However, it’s important to understand what these estimates include. According to Fidelity, their calculation accounts for cost-sharing provisions like deductibles and coinsurance associated with Medicare Part A and Part B (inpatient and outpatient medical insurance), as well as premiums and out-of-pocket costs for Medicare Part D (prescription drug coverage). It also considers services excluded by Original Medicare. Notably, the estimate does not cover other health-related expenses such as over-the-counter medications, most dental services, and long-term care.

    While Fidelity’s estimate can serve as a helpful starting point, the reality is that planning for health care expenses — like all financial planning —should be tailored to your unique circumstances. Let’s delve into key areas where we can customize health care planning for you.

    Understanding IRMAA: The Income-Related Monthly Adjustment Amount

    For 2025, the base Medicare Part B premium is $185. This figure represents about 25% of the total cost, with the government subsidizing the remaining 75%. If the government didn’t assist, the full premium would be $740 ($185 x 4). Since 2007, higher-income beneficiaries have been required to pay more through the Income-Related Monthly Adjustment Amount (IRMAA).

    A recent paper, titled How Medicare “Means Testing” and Tax-Deferred Savings Threatens Retirement Security, raises concerns about how IRMAA can significantly increase health care spending for high earners. This cost is further exacerbated by rising balances in tax-deferred retirement accounts. Required Minimum Distributions (RMDs) from these accounts could push high earners into higher IRMAA tiers, resulting in substantial premium surcharges over time.

    For instance, a hypothetical couple, age 50 today, with $1 million in tax-deferred savings, contributing $38,000 annually until retirement at 66 and earning a 6% return, would have $4.65 million in their account by age 70. Their RMDs would total $169,689. Over a 25-year retirement to age 90, they could pay $763,193 in Medicare Part B and Part D premiums, with $343,279 attributable to IRMAA surcharges.

    While not all clients will face IRMAA-related costs, it’s important to identify strategies to mitigate this risk early. Let’s explore ways we can help you prepare proactively.

    Strategies to Mitigate Retirement Health Care Costs

    Maximizing Health Savings Accounts (HSAs)

    One of the best tools for addressing health care expenses is an HSA. For 2025, the family contribution limit is $8,550, with an additional $1,000 catch-up contribution for individuals over 55. Prioritizing funding your HSA after capturing your employer’s 401(k) match can yield significant benefits. Unlike flexible spending accounts, HSAs are not use-it-or-lose-it, allowing you to let the account grow tax-free. Use other funds for current medical expenses and let your HSA serve as a long-term health care funding source.

    Shifting 401(k) Contributions to Roth Accounts

    Traditional advice often suggests contributing to tax-deferred accounts while you’re in a high tax bracket. However, this approach doesn’t always account for the IRMAA “surtax.” Over time, growing RMDs and IRMAA costs could result in a combined tax rate higher than anticipated—for example, a 38.5% rate for our hypothetical couple at age 80.

    Instead, consider shifting contributions to a Roth 401(k) or Roth IRA. Current tax rates are historically low and could rise in the future. If a Roth option isn’t available, contribute to tax-deferred accounts up to the employer match and allocate additional savings to taxable investment accounts, using tax-advantaged strategies to minimize capital gains.

    Roth Conversions

    The window between retirement and age 73 is often ideal for Roth conversions. However, high-earning clients may find their tax brackets remain elevated due to future IRMAA costs and higher-than-expected tax rates. The earlier you complete a Roth conversion, the more funds you can shelter under the tax-free umbrella, potentially reducing long-term expenses.

    The Top 5 Funding Reminders for Roth IRAs

    Need for Long-Term Care

    The report Long-Term Services and Supports for Older Americans: Risks and Financing Research Brief says that about half (52%) of Americans turning 65 today will develop a disability serious enough to require long-term care; most will need assistance for less than two years.

    A Vanguard-Mercer research paper, Planning for Health Care Costs in Retirement concludes that half of individuals will incur no long-term care costs; a quarter will consume less than $100,000, while 15% will consume more than $250,000.

    So you might say the need for long-term care is luck of the draw: either you’ll need it or you won’t; if you need it, you could spend a lot or a little. Here are some of the factors that influence the need for long-term care:

    • Age—The older you are (that is, the longer you are expected to live), the greater the likelihood of needing long-term care.
    • Gender—Women tend to outlive men so they are more likely to live home alone when they are older.
    • Disability—69% of people age 90 or older have a disability.
    • Health status—Chronic conditions such as diabetes and high blood pressure make you more likely to need long-term care.
    • Living arrangements—If you live alone you are more likely to need paid care than if you live with a partner.

    Another factor to take into consideration are your feelings about it. Some are willing to take their chances and hope they’ll be among the 50% who won’t have any long-term care costs, either because they think they’ll die before needing it or won’t mind turning to family or the government (i.e., Medicaid) for assistance. Others will want to make sure they’ll have any potential long-term care costs covered, even if it means buying an insurance policy or setting aside funds for that purpose that they may never need (in which case the fund becomes their legacy).

    Life Expectancy

    Life expectancy figures into health care planning in two ways: The longer you live, 1) the more you’ll pay in insurance premiums, and 2) the more likely you’ll need long-term care due to the frailties of old age. Although life expectancy can never be predicted with certainty, the Actuaries Longevity Illustrator lets you look at the odds. If your chances of living to the average life expectancy are 50%, what age would you have to plan for in order to have a 20% or 10% or 0% chance of running out of money? The Longevity Illustrator can show you, based on your age now, your gender, whether or not you smoke, and how you rate your health.

    The life expectancy conversation goes hand in hand with the long-term care discussion in that both are dependent on your attitude and preference for dealing with uncertainty. Those who want to be 100% sure there will be enough money to pay health insurance premiums (including IRMAA) for the rest of their life, and also cover long-term care expenses in case they might be needed, will want to set aside enough assets or ensure there is sufficient income to pay for everything to age 100, at least. Others might see such planning as overkill and would not be willing to sacrifice current consumption on the unlikely chance that they might live to 100 and need long-term care. They would require some level of planning, setting aside whatever amount they’re comfortable with.

    A big part of health care planning is simply understanding what the variables are, even when some of those variables cannot be predicted with certainty. By assessing your comfort level, doing some math, and earmarking a portion of your assets and/or income to health care expenses in retirement, you may avoid surprises at a time in life when you are least able to recover from them. Don’t let the uncertainties of life absolve you of this responsibility. Some planning is better than none.

    Tailoring Health Care Planning to Your Needs

    Health care planning is a critical component of your overall financial strategy. While tools like Fidelity’s estimate provide a helpful baseline, true success lies in customizing these plans to fit your unique financial situation, income level, and goals. By addressing considerations like IRMAA and proactively managing tax-deferred accounts, we can help secure a brighter financial future for you. Together, we can develop a comprehensive plan to safeguard your financial well-being.

    Source: Horsesmouth, LLC
    Horsesmouth, LLC is not affiliated with Lane Hipple or any of its affiliates.

  • How to Navigate The Distribution Options For a Non-Designated Beneficiary

    By: Denise Appleby, MJ, CISP, CRC, CRPS, CRSP, APA

    The Ghost Rule and other important factors for non-person IRA beneficiaries.

    When advising beneficiaries of distribution options for their inherited IRAs and employer plans (retirement accounts), one must know the category under which the beneficiary falls. Is the beneficiary a non-designated beneficiary? A designated beneficiary? Or an eligible designated beneficiary? The answer determines the pace at which the beneficiary must take distributions and whether they can roll over inherited employer plan accounts. In this article, we focus on non-designated beneficiaries.

    What is a non-designated beneficiary?

    To answer the question “What is a non-designated beneficiary?” we must first know “What is a designated beneficiary?”

    A designated beneficiary is a person.

    A beneficiary that is not a person is not a designated beneficiary. For the purpose of this article, we refer to such beneficiaries as non-designated beneficiaries. Examples of non-designated beneficiaries include estates and charities.

    Please note: A see-through trust is a designated beneficiary for required minimum distribution (RMD) purposes. Trust beneficiaries are outside the scope of this article.

    The distribution options for a non-designated beneficiary

    The distribution option for a non-designated beneficiary depends on whether the participant died before their required beginning date (RBD). The required beginning date is April 1 of the year following the year in which the participants attained their applicable age, which is the year for which their first required minimum distribution (RMD) is due.

    The applicable age is determined by the participant’s date of birth in accordance with the following schedule:

    • For participants born before July 1, 1949, the applicable age is 70 ½,
    • For participants born on or after July 1, 1949, but before January 1, 1951, the applicable age is 72,
    • For participants born on or after January 1, 1951, but before January 1, 1959, the applicable age is 73,
    • For participants born in 1959, the proposed applicable age is 73*, and
    • For participants born on or after January 1, 1960, the applicable age is 75.

    *The SECURE 2.0 Act is ambiguous regarding the applicable age for participants born in 1959. The proposed regulations for SECURE 2.0 define the applicable age for participants born in 1959 as 73. This rule might change when the regulations are finalized.

    More SECURE Act 2.0 Changes: What 2025 Brings to Retirement Planning

    Special rule for employer plans: An employer plan may provide that an employee’s applicable age is past the ages listed above until the year the employee retires from working for the employer. Beneficiaries should check with the administrator of an inherited employer plan account or benefit regarding whether the participant died before their RBD.

    Death before the RBD-traditional and Roth account

    If the participant dies before their RBD, the 5-year rule applies. Under the 5-year rule, distributions are optional until the 5th year after the participant’s death, when any remaining balance must be distributed.

    Because there is no RMD for Roth IRA owners and—as of 2024, designated Roth accounts (DRA), this 5-year rule applies to such accounts regardless of the age at which the participant dies.

    Death on or after the RBD—traditional accounts and DRAs inherited before 2024

    If the participant dies on or after their RBD, distributions must be taken annually over the decedent’s remaining single life expectancy. The decedent’s life expectancy is colloquially called the Ghost Rule (a term I heard first used by Robert S. Keebler) because it uses the life expectancy of someone who is dead.

    This rule applies to traditional accounts, not Roth IRAs. It also applies to DRAs inherited before 2024.

    When a person is treated as a non-designated beneficiary for RMD purposes

    When a retirement account’s only beneficiary is a non-designated beneficiary, the rules are straightforward—that beneficiary is subject to the RMD rules explained above under The Distribution Options for a Non-designated Beneficiary. However, complexity is added when a person shares beneficiary status with a nonperson.

    While a person is generally a designated beneficiary, a retirement account is treated as not having a designated beneficiary if the person shares beneficiary status with a nonperson. This non-designated beneficiary status for the person can be changed if the nonperson beneficiary properly disclaims or takes a full distribution of its share by September 30 of the year that follows the year the retirement account owner dies. Beneficiaries should consult with their estate planning attorneys regarding eligibility to make disclaimers.

    Example 1

    65-year-old James died in 2024, leaving his daughter Suzanne and a charity as primary beneficiaries of his IRA to be split 50/50.

    If the charity distributes its full share by September 30, 2025, the IRA will have a designated beneficiary, and Suzanne will be able to take distributions under the 10-year rule.

    If the charity does not fully distribute its share by September 30, 2025, Suzanne must take distributions under the 5-year rule because the account would be treated as not having a designated beneficiary.

    Example 2

    75-year-old Janet died in 2024, leaving her son Gary and a charity as primary beneficiaries of his IRA to be split 50/50.

    If the charity distributes its full share by September 30, 2025, Gary will be able to make distributions under the 10-year rule. Gary must also take annual RMDs over his single life expectancy.

    If the charity does not fully distribute its share by September 30, 2025, Gary must take distributions over Janet’s remaining single life expectancy.

    You must ask a person if they are the only beneficiary

    In the examples above, Suzanne and Gary must each transfer their share of their inherited IRAs to their own beneficiary IRAs. If you advise either of these beneficiaries about their distribution options, you must confirm whether each is the sole beneficiary or one of multiple beneficiaries for the IRA they inherited. If a person shared beneficiary status with a nonperson, you must also confirm whether the nonperson beneficiary withdrew (or disclaimed if eligible to do so) their share by the September 30 deadline.

    The beneficiary’s confirmation helps you provide accurate information about their distribution options. Otherwise, your advice could be incorrect. For instance, if you assume that Suzanne is subject to the 10-year rule because she is a person and advises her accordingly, your advice would be incorrect if the charity did not meet the September 30 deadline. As a result, Suzanne will have RMD shortfalls if she does not withdraw any remaining balance by the end of the fifth year.

    RMD shortfalls are subject to a 25% excise tax (reduced from 50% as of 2023).

    No rollovers allowed

    Assets moving from a decedent’s retirement account to the beneficiary’s account must be moved as a nonreportable transfer. This nonreportable movement means no tax forms would be issued, and the transfer would not be reported on the beneficiary or the decedent’s tax return.

    Distributions taken by a non-designated beneficiary- whether from an inherited IRA or inherited employer plan account- cannot be rolled over.

    Pre-death planning consideration

    Many employer plans do not allow non-designated beneficiaries to keep inherited accounts under their plans. For example, the RMD regulations give a non-designated beneficiary 5 years if the owner dies before the RBD, to fully distribute an inherited 401(k). However, the terms of the plan might require the non-designated beneficiary to fully distribute the inherited 401(k) within a few months after the participant’s death.

    IRAs are usually more estate-planning friendly, allowing distributions to be taken over the period available under the RMD regulations, the 5-year rule and the decedent’s remaining life expectancy.

    If you have savings in an employer plan- such as a 401(k), check the summary plan description (SPD) to determine the distribution options available to your beneficiaries. The plan administrator can help you interpret any complex and unclear provisions. If the plan’s options are more restrictive than the RMD regulations, the participant can roll over eligible amounts to an IRA and designate the beneficiaries for that IRA.

    A retirement account owner should have an estate planning attorney who is an expert on the RMD regulations and review their beneficiary designations as a part of their operable state planning.

    Source: Horsesmouth, LLC
    Horsesmouth, LLC is not affiliated with Lane Hipple or any of its affiliates.

  • Financial Transparency: Long-Term Financial Planning Tips for Couples

    Financial Planning Tips for Couples: Build a Stronger Financial Future – Together

    Openness is key to a strong and thriving relationship, especially when it comes to finances. When couples are transparent about their financial status, goals, and future plans, they build trust and foster better communication, both in their relationship and in their long-term financial planning. If you’re unsure how to approach money matters with your partner, this guide will highlight the importance of financial transparency and offer valuable financial planning tips for couples.

    The Importance of Financial Transparency in a Romantic Relationship

    Talking openly about money is often one of the toughest parts of a relationship, yet it’s one of the most important. Financial transparency means more than just revealing your account balances—it includes conversations about your financial mindset, goals, spending patterns, debts, and future plans. Here’s why it matters:

    1. Builds Trust. Honest conversations about money build trust and understanding between partners. When you’re open about your financial situation, it reduces the chances of misunderstandings, arguments, and hidden financial surprises down the road.
    2. Creates Unified Goals. Financial transparency allows couples to set joint financial goals and work together to achieve them. Whether it’s buying a house, saving for retirement, or funding your children’s education, shared goals give your financial planning purpose and direction.
    3. Facilitates Planning. Transparent discussions enable better financial planning. Couples can allocate resources strategically, make informed decisions, and adjust their plans as circumstances change.
    4. Reduces Stress. Money is a common source of stress in relationships. Open communication about finances can help alleviate this stress by allowing both partners to understand the bigger picture and share the responsibilities.

    Related: Mid-Year Retirement Planning Checklist

    Thinking Forward: Long-Term Financial Planning Tips for Couples

    In addition to transparency and a commitment to open and honest communication, these financial planning tips for couples can help you prepare a joint roadmap for your shared future:

    1. Initiate Honest Conversations. Start by sitting down and discussing your individual financial situations openly. Share your income, savings, debts, and credit scores – this will lay the foundation for productive financial planning discussions.
    2. Define Shared Goals. Identify your shared short-term and long-term financial goals. Whether it’s buying a home, traveling, or retiring comfortably, having common objectives gives your financial planning a clear purpose. It’s one of the financial planning tips for couples that will also help you ensure that you’re both staying on the same page.
    3. Create a Budget Together. Collaboratively design a budget that incorporates both partners’ incomes and expenses – and be sure it’s realistic so you can be successful in following it. Think critically about your spending habits and find areas where you can cut back to save for your goals.
    4. Allocate Responsibilities. Divide financial responsibilities based on each person’s strengths and preferences. One partner might be better at investing, for instance, while the other excels at managing day-to-day expenses. Establishing clear roles prevents confusion and ensures both partners are actively involved.
    5. Emergency Fund. This is foundational among financial planning tips for couples. Build an emergency fund that covers at least three to six months’ worth of your joint living expenses. Having this safety net ensures you’re prepared for unexpected financial challenges without derailing your long-term plans – or facing undue financial stress that can negatively impact your relationship.
    6. Manage Debt Together. If either partner carries debt, work together to create a strategy to pay it off efficiently. A smart strategy is to prioritize high-interest debt, like credit cards, and explore consolidation options. By working together to eliminate debt, you and your partner will be able to improve your financial stability significantly.
    7. Invest Wisely. A smart way to build wealth is through savvy investing. Before you begin, research investment options and consult financial professionals if needed. The key is to diversify your investments to mitigate risks and properly align your portfolio with your long-term goals.
    8. Save for Retirement. Both partners should begin saving for retirement as early as possible. Consider opening retirement accounts like IRAs or 401(k)s and contribute consistently. If available, take full advantage of employer match programs as that’s free money that will contribute to the magic of compounding over time.
    9. Regularly Review Your Finances. Set aside time together, perhaps on a monthly or quarterly basis, to review your financial progress. Discuss any changes in your circumstances or goals and adjust your plan accordingly. Get creative, too. This is one of those financial planning tips for couples that can end up being fun if you turn it into a regular date night that incorporates your favorite takeout or a movie, too.
    10. Stay Flexible. Life is unpredictable – just like relationships – and financial plans might need to be adjusted over time. Be open to revisiting and modifying your strategy as circumstances change.
    11. Maintain Open Conversation. Using these financial planning tips for couples is helpful, yet they can’t be one-time endeavors. Regularly discuss your financial status, goals, and concerns. Ongoing communication is key to ensuring you’re both on the same page and working toward a shared future.

    Long-Term Financial Planning for Couples: Do You Need Professional Guidance?

    Financial transparency is essential for a strong partnership, allowing couples to work through the intricacies of long-term financial planning together. By having open discussions, setting mutual goals, and managing your finances collaboratively, you can build a solid foundation for a stable and rewarding future. Keep in mind that reaching your financial objectives is a continuous process. Applying financial planning tips for couples and maintaining honest communication will help you navigate any obstacles that arise along the way.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • SSA Sign-in Process to Change Soon

    In today’s digital age, managing your Social Security benefits has never been easier, thanks to the Social Security Administration’s (SSA) online services. Starting in September, they are transitioning to a new login system. Everyone who set up their Social Security accounts before September 2021 will need to log in with their username and password and follow the prompts to switch to a Login.gov account. People who already have a Login.gov account do not need to take any action.

    The Importance of Establishing an Online Account with the Social Security Administration

    Establishing an online account with the SSA offers numerous advantages that can simplify your financial planning and provide peace of mind. Here’s why it’s essential:

    1. Convenience and Accessibility

    Creating an online account allows you to access your Social Security information anytime, anywhere. Whether you’re at home, at work, or on the go, you can log in to view your benefits, update your information, and manage your account without needing to visit an SSA office.

    2. Real-Time Information

    With an online account, you can view your Social Security Statement, which provides a detailed record of your earnings history and an estimate of your future benefits. This real-time access helps you stay informed about your financial status and plan for retirement more effectively.

    3. Enhanced Security

    Having a Social Security account can also prevent fraud and identity theft, as only one account can be set up for each Social Security number. Once a person sets up their own Social Security account, it would be impossible for an imposter to set one up with the same number.

    4. Efficient Management of Benefits

    If you are already receiving benefits, an online account allows you to manage them efficiently. You can use it to access your benefit verification letter for loan applications or other purposes, update your direct deposit information, change your address, and even request a replacement Social Security card if needed. This streamlined process saves time and reduces the hassle of paperwork.

    5. Access to Additional Services

    Beyond managing your benefits, an online account provides access to a range of other services. You can apply for retirement, disability, and Medicare benefits online, check the status of your application, and receive important updates and notifications from the SSA.

    6. Educational Resources

    The SSA’s online portal offers a wealth of educational resources to help you understand your benefits and make informed decisions. From retirement planning tools to information on disability and survivor benefits, these resources are invaluable for anyone looking to maximize their Social Security benefits.

    Related: Social Security for Divorced Individuals

    7. Environmental Benefits

    By opting for online services, you contribute to environmental sustainability. Reducing the need for paper statements and forms helps decrease paper waste and supports eco-friendly practices.

    Conclusion

    Establishing an online account with the Social Security Administration is a smart move for anyone looking to manage their benefits efficiently and securely. The convenience, real-time access, enhanced security, and additional services make it an indispensable tool for financial planning. Take control of your Social Security benefits today by setting up your online account and enjoy the peace of mind that comes with having your information at your fingertips.

    my Social Security accounts are free, secure, and provide personalized tools for everyone, whether receiving benefits or not. People can use their account to request a replacement Social Security card, check the status of an application, estimate future benefits, or manage the benefits they already receive. For more information visit Create an Account | my Social Security | SSA.

    For more information about Login.gov, including their 24/7 customer phone and chat support, visit Help | Login.gov.

    Read the SSA press release here.

  • Mid-Year Retirement Planning Checklist

    Revisit, Revise, and Strengthen Your Financial Plan for the Remainder of 2024

    Planning for retirement demands a lot from us – and it’s not a one-time job. Whether it be our time, energy, or financial resources, our retirement needs are always evolving, and we must nurture our savings consistently over the years. If you’ve been taking a more hand-off, set-and-forget approach recently, the middle of the calendar year offers a timely opportunity to reflect, reassess, and make any necessary changes so that you can strengthen your financial foundation for the next six months and beyond. If you’re unsure where to start, try using this mid-year retirement planning checklist to kickstart the process.

    Mid-Year Retirement Planning Step #1. Know Where You Stand

    The first step of this retirement planning checklist isn’t focused specifically on retirement. That’s because, before you can strengthen your retirement plans, you must first gain a clear understanding of your overall financial situation. This can be a great source of anxiety, especially if you haven’t closely examined your finances in a while. However, you’ll feel better once you know exactly where you stand. Begin by collecting all relevant documents pertaining to your bank accounts, outstanding loans, debts, and any other elements contributing to your financial landscape. This will help you to compile a detailed list of your assets and liabilities, forming the cornerstone for subsequent steps in our retirement planning checklist.

    Mid-Year Retirement Planning Step #2. Clarify Your Retirement Goals

    Now that you know where you’re starting from, it’s time to determine your desired destination. That means you’ll need to clearly outline your retirement goals. Ask yourself questions such as when you plan to retire, what type of lifestyle you envision, and which activities you want to pursue. Establishing specific and measurable goals will help tailor your savings and investment strategies to meet your unique retirement objectives.

    Mid-Year Retirement Planning Step #3. Review and Adjust Your Budget

    If the first two steps were about determining where you’re beginning and ending, this step is dedicated to constructing a roadmap that will lead you to your final destination – your dream retirement! Regardless of how financially secure you believe yourself to be, adhering to a budget is imperative to remain on the right path to achieving your objectives. If you find yourself uncertain about where to begin or concerned about staying disciplined, there are numerous helpful apps and online resources available to assist you through each stage of the process.

    Mid-Year Retirement Planning Step #4. Maximize Account Contributions

    Now that you’re on your way, be sure that you’re taking advantage of any employer-sponsored retirement plans, such as 401(k)s or 403(b)s, by contributing the maximum amount allowed. These contributions not only reduce your taxable income but also grow tax-deferred until withdrawal. If you’re self-employed or your employer doesn’t offer a retirement plan, consider opening an Individual Retirement Account (IRA) and contributing regularly. Even if you think you have your contributions set, use this step in the retirement planning checklist to assess whether you can contribute more to max-out your options.

    Mid-Year Retirement Planning Step #5. Rebalance Your Portfolio

    While investing is one of the best ways to build wealth, it doesn’t come without risk. Take some time now to diversify your investment portfolio to mitigate risk. Consider a mix of stocks, bonds, and other assets that align with your risk tolerance and retirement timeline. Don’t forget to periodically rebalance your portfolio to maintain an optimal asset allocation and adjust it as needed based on changing market conditions and your risk profile. A financial advisor can be helpful as you navigate this step in the retirement planning checklist.

    Related: New Year, New Goals: Planning Your Money Moves for 2024

    Mid-Year Retirement Planning Step  #6. Fortify Your Emergency Fund

    No matter how prepared you are, there’s always the chance that something unexpected could happen, leaving you with a bill that you weren’t ready to pay. To help protect your retirement savings, it’s important that you have a solid emergency fund set aside. Generally, you want to aim to have at least three to six months’ worth of living expenses set aside in a liquid and easily accessible account. This fund will serve as a financial safety net, preventing you from dipping into your retirement savings in times of unexpected expenses.

    Mid-Year Retirement Planning Step #7. Plan for Healthcare Costs

    Health expenses often increase in retirement, making them one of the biggest threats to retirees’ financial security, so it’s crucial to plan for healthcare costs. Review your current health insurance coverage and consider supplemental insurance, such as long-term care insurance, to provide additional protection. If you’re not yet eligible for Medicare, use this step in the retirement planning checklist to explore other healthcare options to bridge the gap.

    Mid-Year Retirement Planning Step #8. Get Serious About Your Debt

    High-interest debt can erode your retirement savings, so strive to enter retirement debt-free or with minimal debt. To achieve this, develop a plan to pay off outstanding debts, focusing on high-interest debts first. This will free up additional funds for retirement savings and ensure a more stable financial future.

    Mid-Year Retirement Planning Step #9. Choose a Social Security Benefits Strategy

    Social Security benefits can significantly boost your income in retirement, especially when you get strategic about how you claim them to begin with. For instance, delaying the start of your benefits can lead to higher monthly payments. So, take some time to familiarize yourself with Social Security benefits and strategize the optimal time to claim them based on your financial situation. You’ll want to consider factors such as your health, life expectancy, and overall financial situation when deciding.

    Mid-Year Retirement Planning Step #10. Reassess Your Estate Plans

    Estate planning helps you make certain that your assets are distributed according to your wishes, minimizing potential complications for your loved ones. Don’t forget to update or create essential estate planning documents at this point in your retirement planning checklist. This includes wills, trusts, and powers of attorney. Life changes quickly at times, so it’s important that you regularly review and designate beneficiaries for your retirement accounts and life insurance policies.

    Remaining Hands-On with Your Retirement Plan Throughout the Years

    Retirement planning is a continuous process that requires careful consideration and adjustment. By taking time mid-year to use a comprehensive checklist, you lay the groundwork for an enjoyable retirement. If this list gives you anxiety and you would like assistance, reach out to us at Lane Hipple. This checklist is part of our Client Review process, and we are happy to review it alongside you. Remember, the key to successful retirement planning is proactive and informed decision-making.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.