From Retirement Now Newsletter December 30th, 2021

Tomorrow is the last day of 2021.

Which means 2 things:

You have today and tomorrow to do any charitable giving and potentially get a tax write-off for 2021 (assuming your itemized deductions exceed the standard deduction).

And you can use those same two days to also come up with goals for things you want to see happen in 2022.

This may be fitness goals, time management goals, or anything.

Let’s talk about some personal financial goals that relate to your retirement.

First, if you’re still working and have an employer sponsored retirement plan, like a 401k, consider upping your contribution to it.

Second, if you don’t already have a Roth IRA consider opening one. Tax rates are historically low right now. And it looks like as of writing this that the Build Back Better Plan, with it’s proposed tax changes, is not going to pass due to Senator Manchin not supporting it. But don’t let that get your complacent. This shows that tax changes are possible and there is always tinkering, and proposed tinkering, with rates. Keep an eye on the larger long-term issues like Social Security and Medicare and the necessity of funding those when making predictions about where future tax rates may go.

Third, get a general idea of how much you spend each month.

Especially if you haven’t retired yet and are trying to figure out how much you need to accumulate to afford to retire.

There is no “magic number” of how much you need accumulated to retire. It is really a combination of things… to name a few… like how much Social Security you will get, what types of returns you can expect on your portfolio based on it’s composition, and definitely on how much you need to spend to support your lifestyle.

Third (and a half), for extra credit go through your spending to find any items that you are not using but paying for anyway. This is easy pickings to trim out of your spending.

Number four, take a look at your current portfolio and, based on its historical performance, get an idea of what type of future returns are reasonable to expect from it over the long-term.

All of the safe withdrawal retirement studies (like the one that gave us the 4% safe withdrawal rule) were based on using a portfolio that had stocks in it.

At least all the studies I’m aware of.

Which means for those studies they did, they assumed that the portfolio had to have exposure to higher growth assets in order to support the withdrawals throughout a retirement. Without these higher growth assets the safe withdrawal rate would have been much lower.

For you that means you need to see what type of growth can you expect from your portfolio in order to either support your spending in retirement, or (if you are still working) to reach certain savings goals that will support your spending needs when you do retire.

I’ll stop at 4 “resolutions.”

There’s many more things any of us could do to better prepare. But starting with a few is better than being overwhelmed and actually doing none of them.

And if you need help with resolution number 4 feel free to reach out to me for a no obligation phone chat and I’ll help point you in the right direction. Happy New Year,