The finish line is finally in sight.
If you’re planning to retire in 2030, the finish line is finally in sight. Maybe your plans for your senior years are starting to take shape as you contemplate where you’ll live and how you’ll spend your time. Or perhaps you’re anxious about that looming retirement date because you’re not sure you can afford to live without a paycheck.
You still have time to correct the course if you feel like your retirement planning has gotten off track. Follow these five tips to bolster your savings if you’re planning to retire in 2030.
1. Take advantage of catch-up contributions
If your planned retirement date is seven years out, there’s a good chance you’re eligible to make catch-up contributions to your retirement accounts. Catch-up contributions are additional amounts the IRS allows workers approaching retirement age to make to tax-advantaged accounts. In 2023, people 50 and older can contribute the following amounts:
- $30,000 to a 401(k), 403(b), and most 457 plans (limit is $22,500 for workers younger than 50)
- $7,500 to a Roth IRA or a traditional IRA (limit is $6,500 for workers younger than 50)
Granted, these limits are out of reach for many workers. But if you have room in your budget, consider taking advantage of catch-up contributions to save extra for retirement.
2. Stash money in an HSA
A health savings account (HSA) offers a triple-tax-advantaged way to save for medical expenses. Your contributions are pre-tax, your money grows tax-free if you invest it, and your withdrawals are tax-free if they’re used for medical expenses. Once you reach age 65, you can also make withdrawals for any reason and avoid the typical 20% penalty, though you’ll owe taxes on the distributions.
If you have an HSA and your healthcare costs are relatively low, aim to pay out of pocket for medical expenses when you can so you don’t have to tap your HSA. You can take tax-free withdrawals for your medical expenses in retirement. Fidelity estimates that a 65-year-old retired couple will spend $315,000 on healthcare during retirement, so keeping money in your HSA to shoulder those expenses is a smart move.
3. Review your asset allocation
When you have 25 or 30 years of work ahead of you, maximizing growth is often the main investment goal. But in the decade or so before retirement, many people shift toward more conservative assets.
A stock market crash can devastate a retiree’s budget. It’s essential to review your asset allocation now and gradually start moving some of your money into stable investments, like blue chip dividend-paying stocks and bonds. Consider meeting with a financial advisor to make sure your investment mix is appropriate for your goals.
Having healthy cash reserves is also essential heading into retirement. If the market tanks, you’ll be able to live off your savings and give your investments time to recover.
4. Pay off debt selectively
Paying off debt before retirement may seem like a no-brainer. But not all debt is created equal. Paying off high-interest debt like credit cards is a must. But if you locked in an ultra-low-interest mortgage in 2020 or 2021, it may make sense to keep your mortgage and put excess money into retirement accounts.
5. Aim for flexibility
Even if you’ve had 2030 circled as your retirement date for a long time, giving yourself a bit of wiggle room can pay off. For example, suppose you’ll reach full retirement age in 2030, but as the date approaches, you find that your retirement savings are lower than you’d prefer.
Working just one extra year could make a substantial difference. The extra year of work could help you delay Social Security by a year, earning you an 8% boost, thanks to delayed retirement credits. Because you’re still earning a paycheck, you’d avoid dipping into your retirement accounts and could continue saving, as well.
A lot can happen in seven years. A little flexibility can go a long way should the unexpected occur.
