4 Tips To Regain Your Retirement Focus In 2021

by Drew Snider, CFP®

Director, Financial Planning, Coastal Credit Union, Financial Advisor, CUSO Financial Services, L.P.

3.29.2021
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Member Tips
This infographic is explained below

4 Tips To Regain Your Retirement Focus In 2021 - Infographic

With 2020 now long behind us, it’s time to get back to your goal: retiring on your terms when you want to! In this article we’ll discuss 4 tips to get your retirement savings on track.

TIP 1: Increase your savings by 1%

If you participate in a retirement savings plan at work, try to increase your contribution rate by just 1% now and then each year after until you reach the maximum amount allowed. With 30 years to save and regular salary increases, your retirement nest egg could be twice as much by following this simple tip.

2021 Contribution limits:

401(k), 403(b), 457(b), Roth 401(k) plans elective deferrals: $19,500

Catch-up provision for individuals 50 and over, 401(k), 403(b), 457(b), Roth 401(k) plans: $6,500

SIMPLE plans, elective deferral limit: $13,500

SIMPLE plans, catch-up contribution for individuals 50 and over: $3,000 

Traditional IRA, Roth IRA: $6,000             

Traditional IRA, Roth IRA catch-up contribution for individuals 50 and over: $1,000             

To Roth or not to Roth? Is that your question?

If you have an after-tax Roth contribution option in your 401(k) plan you might be asking if you should use the pre-tax or after-tax Roth option. We get this question from many Coastal Members. If you choose to invest in the Roth 401(k) option, you give up the tax savings today as compared to choosing the Traditional pre-tax 401(k) option. However, qualified distributions from your Roth 401(k) in retirement will be tax-free. We can help you understand the important factors in making this decision to use the Roth, or not. 

TIP 2: Review your tax situation

If you get a refund each year, consider trying two things. One, change your tax withholding from your paycheck and increase your 401(k) savings. Or two, use your tax refund check to build your retirement nest egg. Where you invest it will depend on your ability to contribute to a Traditional IRA or Roth IRA.  If you owe taxes, be sure you are not paying a penalty for under-withholding.

Some members might be able to contribute to a Traditional IRA or Small Business Retirement Plan like a SEP IRA. Some situations that allow for a potential Traditional IRA contribution are members who don’t have a retirement plan at their employer and spouses who don’t work but might be able to contribute based on the spouse’s income. Furthermore, many Americans are earning extra income with a side-hustle or part-time work. You might be able to use that income to start your own retirement plan and save more for your future in a tax smart way.

If your health insurance plan is qualified as a high deductible health insurance plan, you might be able to contribute to a Health Savings Account (HSA). Contributions are tax-deductible, the interest grows tax-deferred and qualified distributions for health care needs are tax free. 

Before making any of these changes be sure to consult a tax advisor.

TIP 3 – Rebalance your portfolio

Market turbulence throughout the past year may have caused your target asset allocation to shift toward a more aggressive or conservative profile than is appropriate for your circumstances. Asset allocation is a method used to help manage investment risk but owning a portfolio of diverse investments; it does not guarantee a profit or protect against investment loss.

Many retirement accounts have an option to automatically rebalance annually. If your portfolio is not rebalanced automatically, now might be a good time to see if adjustments need to be made.

Typically, there are two ways to rebalance: (1) you can do so quickly by selling securities or shares in the overweighted asset class(es) and shifting the proceeds to the underweighted one(s), or (2) you can rebalance gradually by directing new investments into the underweighted class(es) until the target allocation is reached. Keep in mind that selling investments in a taxable account could have tax consequences.

TIP 4 –Revisit your retirement plan

When you first started saving in your retirement plan or IRA, you may have estimated how much you might need to accumulate to retire comfortably. If you experienced any major life changes during the past year — for example, a change in job or marital status, an inheritance, or a new family member — you may want to take a fresh look at your overall savings goal as well as the assumptions used to generate it. As circumstances in your life change, your savings strategy will likely evolve as well.

Ready to Regain your Retirement Focus? Connect with us!

We’re here to help you develop your plan and stay on track for a comfortable retirement. Connect with a CFS* Financial Advisor to schedule your free retirement plan review. We can assess your current retirement income strategies to see if you are on track to meeting your financial goals.

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© 2021 Broadridge Investor Communication Solutions, Inc.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Coastal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Trust services available through MEMBERS Trust Company. CFS and Coastal Credit Union are not affiliated with Members Trust Company.