When is the last time you evaluated your retirement goals? Your 50s are a good time to get a holistic view of your finances.
As you get closer to retirement, you might start to imagine a different life for yourself in the future. Do you want to continue working — part time or perhaps as a consultant? Do more volunteer work in your community? Travel the world? The possibilities for your retirement journey are as unique as you are. As you prepare for takeoff into your retirement, creating an action plan that includes your Individual Retirement Accounts (IRAs) and other resources can help give you confidence that you're on the right road toward retirement. Think of it as a preflight itinerary for your retirement journey. Your IRA can complement other sources of retirement income, such as Social Security, pensions, and annuities. As part of your overall plan, an IRA can also help provide the flexibility to pay for both essential and discretionary expenses.
Prepare for your next phase
It's a good idea to make a few basic decisions about how you'll manage your finances before you actually embark on your retirement journey.
- Take advantage of the opportunity for catch-up contributions. Starting the year you turn 50, you can begin making catch-up, tax-advantaged contributions to your 401(k) plan and IRAs to help you reach your savings goals as retirement nears. In 2015 and 2016 you can put an additional $6,000 into your 401(k) and an additional $1,000 into an IRA.
- Consolidate your retirement accounts. Do you have multiple retirement accounts carried over from former employers or IRAs that you have set up over the years? Your 50s are a great time to learn what the options are for your retirement assets and get a clear picture of what you have and what your retirement income sources will be.
- Plan your retirement account distributions. Depending on your circumstances, you can begin taking distributions from your retirement accounts at age 59 1/2 and, depending on the account type, you must begin taking distributions by age 70 1/2. If you have your retirement date in mind, you will want to plan when to begin taking distributions from your Roth IRA, Traditional IRA, and your 401(k) plan, if you have one. The rules are complex, and you will likely base your decision on other sources of income that you have access to, so it's a good idea to discuss this with a retirement professional.
- Decide when to take Social Security. You should start thinking about when to take Social Security distributions at least 10 years before you are eligible to do so. Having a good idea of what your total resources are, including any IRAs, will enable you to gauge how long you can wait to begin taking distributions. Waiting even a couple of years after your initial eligibility can help maximize your distributions over the long term.
- Plan for health care costs. One important aspect of planning in your preretirement years is taking stock of your health care needs. With retirees spending 20 years or more in retirement, health issues and how to pay for them have become more important. Set up a time to talk with a retirement professional about what you anticipate your health care needs will be, how to cover Medicare shortfalls, and how you will cover potential needs for long-term care.
Learn more about how an IRA can help your dreams for retirement take flight by visiting our IRA Center.