5 Useful Tips for Tax Planning in Retirement in Worthington, OH
Take advantage of these five tips for tax planning in retirement!
Learn the basics of how retirement planning can change over the course of your life.
Just like other aspects of your life that have changed with age, your investment decisions will likely shift as you move towards retirement age. Whether you’ve been saving since your 20s, or you realize that you need to buckle down as retirement looms on the horizon, a retirement plan is crucial. Although each individual’s priorities and goals differ, these key differences can help you understand the role of age as you devise an investment plan for retirement in Worthington, OH.
Retirement often feels out of reach in your youth. But, as you enter your 50s, you may begin to realize that it’s closer than you thought. With this life shift also comes changes in risk tolerance, tax treatments, and catch-up contribution opportunities. Re-evaluate your retirement savings and investment options by considering where you fit in life’s chapters.
One of the most significant differences in overall retirement plan strategies is risk tolerance. Generally, the willingness to take on a high-risk investment strategy decreases with age. In your youth, you have time for mutual funds and assets to recover from a downturn. However, if you’re only a few years from retirement, you don’t have nearly the same amount of time to regain losses and will likely benefit from lower-risk investment choices. That said, your ability and willingness to take risks also come into play. A trustworthy financial advisor will take your comfort level with losing money into account, regardless of your age.
In addition to risk tolerance, your age can dictate some of your investment options and the ideal mixture of investment allocations for you.
During the early stages of your career, you’ll likely take advantage of an employer 401(k) plan, Roth Individual Retirement Account (IRA), or Traditional IRA to help grow your retirement account. You don’t have to hit contribution limits at this stage of life. However, it’s a good idea to invest the minimum distributions to take advantage of any company match that you have eligibility for. With ample time until retirement, it’s common to have more of your portfolio invested in stocks at this time.
Re-evaluating your retirement account strategies in your peak earning years can help you reach your goals. In general, you’ll want to shift your assets to a slightly less risk-oriented approach. If you aren’t already, start contributing the maximum allowed to your 401(k) or Roth IRA if possible. This is also an excellent time to start discussing the timing for taking your social security benefits, determining how much retirement income you’ll need, and addressing how you will liquidate any retirement accounts and brokerage accounts.
Investing in your 50s requires you to take a look at the big picture. Take stock of your current financial picture and see how well it lines up with your retirement timeline and plans. At this point, you can determine the right amount of risk in your asset allocation. Consider health care costs, any long-term care you foresee needing for yourself or your spouse, and what you can expect in income taxes.
There are a lot of decisions to make when it comes to financial planning in Worthington, OH. For expert help that you can trust to put your interests first, consider reaching out to Royal Oak Financial Planning. Our financial advisors can assist you in determining what’s right for you. Whether you’re interested in annuities, 401(k) rollovers, making sense of tax-free and tax-deferred retirement savings, or general personal finance advice, we’re here to help. Contact us today to get started planning a smooth transition to your retirement.