Yahoo Finance Retirement 2024: 10 Things To Check Mid-Year on Your Retirement Plan
Some careers offer much better retirement benefits than others, according to a new 401(k) benchmark report that analyzed and compared 27 different industries.
Those employed in the accommodation and food services industry, for example, ranked last place in terms of 401(k) retirement account contributions. This is even accounting for the fact that employee contributions rose by 56% year over year.
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Meanwhile, the top-performing industry group goes to certified public accountants (CPAs) for the second year running. There was still a 22% year-over-year decline in the average account balance — down to $32,645 — and employee contributions fell by about 10%. Even so, this particular industry is still firmly at the top.
On the whole, the report found that the total number of employer-sponsored plans dropped from 626,000 to 610,000 in one year, and that the total number of assets decreased by roughly 20% across all industries. Participation rates in these plans also fell slightly, though this could be due to the creation of 3,500 new 401(k) plans rather than a lack of actual contributions.
As the middle of the year approaches, now is a good time to look over your retirement plan and make sure everything is on track. If you’re not sure where to start, here are the main things to check.
Up-to-Date Information
Part of ensuring you’re on track to reach your retirement goals is making sure everything is up to date on your plan. This means figuring out who your beneficiaries are, reporting any major life changes and ensuring your credentials are correct so you don’t end up losing track of or getting locked out of your accounts.
“When you are reviewing and possibly updating your retirement plan make sure everything is current,” said Jason Bernat, president and CEO at American Financial Services. “Let your advisor know if you plan to change jobs, have any changes to household debt, and even if there is a change in someone’s health. All these factors should be taken into consideration when putting together your retirement plan and reviewing it mid-year.”
Bernat also suggested making sure you have your current estate planning documents in order, and that your advisor — if you have one — has the relevant copies on file. This can help prevent headaches down the road.
Your Budget and Spending
“[Make] sure you are staying within your budget, especially as summer ramps up and you want to do more activities,” said Michael Arvay, founder and CEO of Marvelous Retirement Planners. “With inflation on the rise, retirees should make sure their budget is in line for end of the year taxes if they are pulling money from their IRA, 401(k), etc.”
The last thing you need is to spend too much and then have to cut back on your retirement account contributions.
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Your Portfolio
The middle of the year is also a good time to review your portfolio, make any necessary adjustments and make sure you’ve got a clear overview of your overall financial situation.
“Rebalancing and reallocating your portfolio once or twice a year is important under normal circumstances. After bouts of more market extreme volatility, it may be necessary to do it more often,” said Stephen Kates, CFP, and principal financial analyst for Annuity.org.
“A strong retirement plan should include elements that will offer diversification of income,” he continued. “By creating a plan that will provide guaranteed income, growth, and flexibility, the retiree will have a balance of asset sources that can handle different market environments and financial needs.”
Taxes and Retirement Distributions
“If you work with a financial advisor, the late spring and summer are great times to meet because it falls between tax season and the fall when events like back-to-school, open enrollment, charitable giving, and required retirement distributions are due,” Kates said. “This time of year is perfect for reviewing tax returns and planning for financial events later in the year.”
Your Financial Goals
“In any retirement plan, I always stress the importance of identifying assets and setting financial goals,” Bernat said. “You want to be really clear about the purpose of each asset and how it will be used. Is it for supplemental income, medical expenses, or miscellaneous?”
If you have a complex financial portfolio, you may want to do this with a professional who won’t miss anything major. If your situation is more straightforward, you can do it on your own. Whatever else, reviewing your goals and assets can keep you on track, which is why you may want to do it more often than just once a year.
Risk Levels and Tolerance
A lot can change over your working years, including your risk tolerance, so it’s a good idea to review your retirement plan and make sure everything still aligns with your goals.
“I believe every retirement plan should have a great deal of diversification and asset allocation. Both help keep the risk of a portfolio a little lower by having multiple areas of investments — maybe a money market account or shorter-term fixed annuity just to balance some of your risk,” Arvay said.
“Take time to review your portfolio and make sure it’s still on track with your goals and objectives,” he continued. “No one is getting younger, so what you were comfortable with risk-wise last year might not be the same as this year.”
Retirement Account Contributions
When it comes to contributing to your retirement account, the earlier you start, the better. But even if you start later in your career, that’s OK too. What’s important is to start maximizing your contributions as soon as possible.
“If your company has a retirement account, enroll. If they don’t, open an individual retirement account or IRA,” said Melissa Murphy Pavone, CFP, CDFA, and director of investments at Oppenheimer & Co. Inc. “By maxing out your retirement contributions you are building a solid financial foundation for your future.”
And if you’re over the age of 50, you can take advantage of catch-up contributions.
“Not only will this boost their retirement savings but [it] could possibly be tax advantageous,” Pavone said. “Catch-up contributions offer a valuable opportunity for individuals over 50 to accelerate their retirement savings and secure a more comfortable financial future.”
While you’re at it, make sure you’re getting those employer-matching contributions, too.
Available Benefit Options
“Now that we’re nearing the middle of 2024, open enrollment in the fall is on the horizon, and a couple of years before retirement is a good time to review the benefit options available through your employer,” said Erin Wood, a CFP and senior vice president of financial planning at Carson Group.
Make sure you’re getting the most tax benefits, too. Again, this is something you might want to do with a professional or on your own. Regardless of what you choose, it’s important to get the most benefits while lowering your taxable income so that you have more net income for additional retirement savings or spending.
“If you choose to add the additional money to your pretax retirement account, this will lower your taxable income even more,” Wood said. “Optimizing taxes now and in the future is an important part of retirement planning, as it can help those nearing retirement feel more by stretching your money to work harder for you.”
Income and Budget
Part of planning for retirement involves reviewing your budget, but also your overall income, assets, debts and other liabilities.
“I think keeping your income and budget in mind is also important, so having an income analysis done annually…is crucial,” Arvay said. “This will help make sure you will never run out of money, or that your money is being used in a manner that is efficient.”
Retirement Savings
“If it’s been a while since you checked on where you’re at in your retirement savings compared to where you should be, now’s a good time to do that,” said Todd Stearn, founder and CEO of The Money Manual. “If you aren’t quite where you should be, then now is an excellent time to look at your budget and see where you might be able to make some cuts to put more money toward retirement.”
And if you don’t have a budget, or if yours is wildly out of date, you’ll want to create a new one that’s more accurate to your needs and goals.
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This article originally appeared on GOBankingRates.com: Retirement 2024: 10 Things To Check Mid-Year on Your Retirement Plan
