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Saving for Retirement in 2023: 7 Points for a Quick Financial Checkup

Saving for retirement is ongoing—very ongoing, considering it spans decades. That makes it easy to put on autopilot, or even forget about it completely. But you should actually do regular financial checkups to make sure you’re on track for a successful retirement.

Especially if you’ve recently switched jobs, had a child, gotten married or divorced, or experienced any other major life changes, a financial checkup makes sense. And times of economic uncertainty have a way of shifting things around, as well. 

So whether you’re saving for retirement in five years or twenty five years, it might be time for a financial check up. We cover 7 areas to evaluate when it comes to your retirement savings and financial plans. 

Time for a Financial Checkup on Your Retirement Saving Strategy? 

Saving for retirement is not a set it and forget it deal. It would be nice if it were! One of your smartest financial moves this year (and every year) will be to run a quick financial checkup on your retirement saving strategy. 

Given that it’s your future at stake, this little bit of maintenance is a small price to pay. So, take some quick vitals: 

  • Are you taking advantage of all the opportunities available to you? 
  • Do your current investments still make sense for your goals and financial situation? 
  • Are there economic factors at play *cough* recession and inflation *cough* that might require you to adjust your savings plans? 

Depending on how you answer these questions, you might be due for a financial checkup. And when it’s time to look under the hood of your retirement savings strategy, here are 7 financial points to keep in check: 


Make Sure You’re Getting The Most From Your 401(k)

If your employer provides a 401(k) matching program, it’s highly to your benefit to take advantage of the max match. It really is free money! 

If you just changed jobs or are looking, this is your perfect chance to optimize. Make sure you contribute enough to get the maximum match from your employer. 

If you’ve been at your job for a while and you just took the default options, there’s a good chance you’re leaving money on the table. Most employers will automatically set the contribution rate at much lower than the max. So, check that paperwork ASAP and make adjustments if needed. 


Set your Savings Rate at 10% or Higher 

At a minimum, you should be putting 10% of your salary into your 401(k) – 10% being the combined total from your salary contributions and your employer match. Or if you’re self-employed, put at least 10% in your SEP IRA, solo 401(k) or other retirement plan. 

While 10% is a good minimum, 15% is an even better target. If you’re not yet saving 10% or 15%, boost your 401(k) contribution rate by at least 1 percentage point every year until you reach your target rate.  


Raise Your Savings Rate Along with Your Income 

Normally when people’s income rises, their cost of living magically does too. If you land a raise this year, use it to boost your retirement savings rather than splurging on a fancy new car or a bigger home. 

Promise yourself to raise your retirement savings rate by half of your income gains. For example, let’s say you get a 5% raise, vow to raise your retirement savings contributions by 2.5%. You won’t even notice it, given your new higher income, and your future self will thank you.


Take the Roth 401(k) Option When Possible 

Most employer-sponsored retirement plans now offer the choice to save in a traditional 401(k) or a Roth 401(k). If it’s available to you, we recommend the Roth option for the tax benefits. 

If your plan doesn’t have a Roth option, you should still contribute enough to the traditional 401(k) to qualify for the maximum matching contribution from your company. Then build upon that by saving for retirement in your own individual accounts.


Open a Roth IRA, Too

Speaking of individual accounts, whether you have a 401(k) or not – but especially if you don’t – you should consider opening a Roth IRA (Individual Retirement Account). Roth IRAs are low-cost, easy to set up, and you have a wide choice of funds and ETFs to invest in. 

This year, individuals with modified adjusted gross income below $138,000 and married couples filing a joint tax return with income below $218,000 can contribute $6,500 to a Roth IRA. The limit is $7,500 if you are at least 50 years old.

Review Your Asset Mix

When planning and saving for retirement, a long-term view is your best bet. But that doesn’t mean you shouldn’t check in every so often. Rebalancing your portfolio helps manage risk, combats drifting too far from your target allocations, and ensures you have a healthy mix of stocks and bonds. Your financial advisor can help you determine whether any adjustments need to be made. 


If You Leave Your Job, Don’t Cash Out. Rollover

When you leave a job, you have the right to cash out all or a portion of your 401(k). Don’t do it! Even if it seems like a small amount, a dollar you cash out today is a dollar that could be growing for your retirement down the line. $5,000 now will be worth $16,000 in 20 years (assuming a 6% annualized rate of return).

Whether you leave for a better job, a career change or to start a business, there are better options than cashing out: 

  1. If your existing 401(k) has low-cost index mutual funds, you might just want to leave the money growing there. 
  2. If your new employer has a great 401(k), you may be able to move your money from your old plan to your new plan. The service is free, but will require a bit of paperwork. 
  3. Roll your old 401(k) into an IRA. If you have the 401(k) plan provider and the brokerage work together, there will be no tax on this rollover. 

Retirement Savings as Part of a Larger Financial Checkup

The items on this list are retirement planning focused, to be sure. They’re also part of a larger financial plan that incorporates all aspects of your financial life, including your: 

  • Short, medium, and long-term financial goals 

  • Monthly budget 

  • Credit reports 

  • Debt situation

  • Insurance, including life and long-term care plans

  • Estate plans  

  • Ongoing tax management

Remember, experts suggest conducting a financial checkup on an annual basis or after major life events, such as a marriage, divorce, birth, or death.

A financial advisor, such as a Certified Financial Planner, can review your plans to help you optimize your retirement savings, advise you on any recommended changes, and determine the best path to get you where you want to be. 

Download our free Essential Retirement Planning Guide to discover 7 things you need to do before you retire.

Disclosure: For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third-party data which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are unmanaged baskets of securities and are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Total return includes reinvestment of dividends and capital gains. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements, or representations whatsoever by us regarding third-party websites. Wealth Legacy Institute is not responsible for the content, availability, or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products, or services available on or through these third-party websites. The opinions expressed by featured authors are their own and may not accurately reflect those of Wealth Legacy Institute®.

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