Are you entering the last decade of your career? For many people, the final 10 years before retirement are filled with a mix of excitement and stress. On one hand, you’re likely excited to leave the working world behind and embrace the freedom of retirement. On the other hand, you may be worried about whether you will have enough money to fund your retirement.
One way to better prepare yourself is to maximize your contributions in these final years. Take advantage of catch-up contributions to maximize your savings and boost your retirement account balances. Catch-up contributions allow those 50 and older to make IRA and 401(k) contributions above and beyond the standard annual limit.
Saving more money isn’t the only strategy you can implement, though. There are a number of other steps you can take in these final years to minimize risk and put yourself in better position to enjoy a financially stable retirement. Below are a few additional planning steps to think about:
Contribute to a health savings account (HSA).
Many people assume that Medicare pays all health care costs in retirement. That assumption is usually incorrect. Fidelity estimates that the average 65-year-old couple will spend $260,000 on out-of-pocket health care costs in retirement.1 Those costs include things like premiums, deductibles, copays and treatments that aren’t qualified for Medicare coverage.
You can prepare for these costs today by funding a health savings account. Contributions to HSAs are tax-deductible, and the funds grow tax-deferred while in the account. Withdrawals from your HSA are tax-free as long as you use the funds for qualified health care costs. Maximize your HSA contributions to create a health care reserve fund in retirement.
Consider long-term care insurance.
While it may not be pleasant to think about, the prospect of needing long-term care in retirement is too important to ignore. The U.S. Department of Health and Human Services estimates that 70 percent of retirees will need long-term care at some point.2 Long-term care is often needed for years, and it can cost a substantial amount of money.
You can manage the out-of-pocket costs by purchasing long-term care insurance. With long-term care insurance, you pay premiums today in exchange for coverage in the future. Many policies cover care provided either in the home or in a facility. Some also have death benefits, so your loved ones will receive any unused coverage after you pass away.
Develop a backup plan.
Unfortunately, even the best-laid plans can be thrown off-track by surprises. For example, you could reach retirement and find that you haven’t saved enough money. You may be forced to retire early due to disability or job loss. These things may not seem likely, but they do happen.
Think about what steps you could take to protect your retirement. Perhaps you could downsize, reducing your income needs. Maybe you could gradually transition into part-time work, using your skills and talents to generate income while still maintaining a flexible schedule. Be creative and think of fallback options should your plan go awry.
Ready to plan your final years before retirement? Let’s talk about it. Contact us at Sawyer Wealth Management. We can help you analyze your needs and develop a strategy. Let’s connect today and start the conversation.
2http://longtermcare.gov/the-basics/who-needs-care/
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