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Don’t Forget to Review Your Retirement Finances Over the Holidays


By , with Annuity FYI

(Editor’s note): Everybody likes to have a fun holiday season, and this certainly includes seniors. But don’t throw caution to the wind. Social Security payments are helpful but not particularly large. Few seniors enjoy the kind of steady income they enjoyed during their full-time working years. So they need to think about budgeting for the long term, now more than ever. According to the Employee Benefit Research Institute, newly retired Americans are likely to have relatively higher levels of debt than those who retired in the 1990s. In fact, many people are placing themselves at risk of running short of money in retirement. Among households headed by an individual age 75 or older, the percentage with debt has increased by nearly 60 percent since 2007, according to EBRI. Most important, EBRI says most Americans who reach the age of 65 at likely to live at least 20 more years. That’s a good reason to rein in spending for the long run, especially since a study by Wells Fargo found that nearly four in in 10 workers said living past 85 would be a financial hardship.

Bottom line, financial liabilities are a vital, but often ignored, component of retirement income security. The point is to be mindful of such statistics, not fearful, and adjust your spending patterns accordingly.)

This should be a time to tend to end-of-year-financial planning, which is almost always a financially worthwhile endeavor. 

We’re in the thick of the holiday season, and like most people you’re probably busy with Christmas or Hanukkah shopping, hosting and attending holiday parties and perhaps preparing for a winter vacation. It’s not as much fun, but this should also be a time to tend to end-of-year-financial planning, which is almost always a financially worthwhile endeavor.

With this in mind, here are some tips from Annuity FYI and other financial planners about what to review: Consider checking in with your financial adviser for additional guidance.

* Review your investment portfolio. Make sure your asset allocation still makes sense. The stock market enjoyed strong years in 2021, 2020 and 2019, but is now unusually pricey and may be more than ready for a breather. Regardless, when was the last time you checked your asset allocations? If it has been a year or more, you’re likely to find that your equity allocation is much higher than you initially planned and should be rebalanced. If you’re in the market, you should stay there at a reduced level because it’s always a good long-term investment. Yet prudence, especially at this juncture, is in order. 

* Review your overall retirement plan. In particular, consider increasing contributions to tax-deferred accounts such as IRAs. Baby boomers and Gen Xers who aren’t meeting retirement savings goals should consider getting back on track, even if that means trimming current living expenses. Those 50 and older might want to consider making catch-up contributions to their IRAs. 

* Harvest investment losses. If you invest in stocks, bonds or mutual funds outside of tax-deferred accounts, you may be able to cut taxes on any investment gains. There may have been times in 2021 when you invested some funds in the stock market, shortly before it declined for a while, and that may have prodded you to liquidate some holdings at a loss. Those who sold at losses can offset realized taxable gains on investments with realized capital losses. Tax-loss harvesting must be done by December 31.

* Check your tax withholding if you’re near retirement and still working. If the amount you’re withholding is materially less than necessary to meet your tax liability, increase it. If it is more, you probably should trim it – savings rates, while still low, have improved bit and are likely to be higher still in 2022. 

* Make sure you take your RMDs. Those 72 and older must take required minimum distributions from retirement accounts by December 31. If you don’t, you’ll face a steep penalty, as well as the income tax tab. This also includes clients who may be recipients of inherited IRAs.

* Review your estate plan. Many people falsely believe that creating a will is a one-time event. It isn’t. It’s important to review wills and other estate planning documents at least once a year and consider changes to your health, finances and relationships. Make sure you document a new spouse, children or grandchildren.

* Don’t forget about charitable giving. It’s the right thing to do during the holiday season if you can afford it. If you’re unsure which charity to select, check out GuideStar, the world’s largest source of information on nonprofit organizations. Make sure you choose a qualified organization to reap the tax benefit. If you’re still working, note that many employers also match charitable contributions.

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