3 key end-of-year retirement check-up tips
As the end of the year approaches, investors may want to think about taking stock of their retirement plans.
While the policy outlook might be uncertain, there are some ways to make the most out of your savings regardless of how external factors may change over the near-term.
Here are some critical areas to evaluate leading up to the New Year.
Health Savings Accounts
Health Savings Accounts (HSAs) offer what senior retirement consultant Marina Edwards calls a “triple tax benefit.”
“The money goes in pretax, the money grows tax-deferred and the money comes out tax-free when used for medical benefits,” Marina, who works at Willis Towers Watson, told FOX Business.
As previously reported by FOX Business, current retirees heavily underestimated how sick they would be as they got older, not to mention how costly health care benefits can be.
Edwards advises clients to consider contributing the match-point to their company’s retirement plan, and investing the rest in a Health Savings Account. So if your company will match contributions up to 6%, but you’re contributing 8%, you might want to consider taking that extra 2% and investing in a Health Savings Account.
Salary deferrals
Many people are invested in their company’s retirement plan, which places them into the age-appropriate target date fund.
Edwards said that while there’s nothing wrong with investing in the default plan, investors should still check in to see how that plan is allocated as they approach their retirement years.
For example, some funds, she pointed out, are the most conservative they will ever be by the age of 65, while others will gradually become more conservative through an individual’s 80’s or 90’s, which would generate a higher amount of growth throughout those years.
As Americans live longer lives, the challenges of saving for retirement have become magnified, so it may be worthwhile to assess what you have saved and what your goals are when it comes to your salary deferral.
However, the U.S. Census Bureau found in February that two-thirds of Americans were not putting any cash into their employer-provided retirement accounts. Most experts agree, it is important to start saving as much as you can, as early as you can.
Beneficiary designations
Each respective retirement plan, Roth IRA, 401(k), etc., has its own form for designating beneficiaries. The end of the year might be a good time to take stock of who is on each of your lists, Edwards said.
She also notes that if you are going through a divorce or would like to add or subtract a beneficiary, it is not enough to simply change your will.
“Something that many people don’t know is if you change your beneficiary in your will it does not carry over into your 401(k),” she said.
By law, the formal beneficiaries listed on each plan would be entitled to the assets, regardless of what a will stipulates.