These simple moves are effective ways to make sure you’re in a good financial position for retirement.
It’s that time of year again when people are winding down while simultaneously setting their sights on improving different aspects of their lives in the new year. Sometimes, it’s financial; sometimes, it’s physical; sometimes, it’s mental; and many times, it’s a combination of them all.
As we approach 2024, there are some moves you can make to help benefit yourself in your golden years in retirement. These simple (yet crucial) retirement moves can go a long way toward ensuring you’re financially prepared for retirement.
1. Making sure your portfolio allocation still aligns with your goals
Investing is a personal game. No one strategy will fit every person because everybody has their own financial and retirement goals, risk tolerance, and time horizon. Someone in their mid-50s probably wouldn’t have the exact same strategy as someone in their early 30s, and it’s probably better that way.
As the new year approaches, use this time to look at your portfolio and make sure it still aligns with your goals, risk tolerance, and time horizon. Maybe you’re more comfortable with risk and want to increase your exposure to growth stocks. Maybe you plan on retiring earlier than planned and want to shift toward dividend stocks.
Whatever the case, reviewing your portfolio regularly is a good habit to form. Even if your allocation was set to your liking when you made your investments, it could have shifted because of market fluctuations and investment performances. A good check-in can always do some good.
2. Contribute to a traditional IRA to lower your tax burden if you’re eligible
A traditional IRA is a retirement account that allows you to make pre-tax contributions and potentially reduce your taxable income for the year. It’s similar to a 401(k) in the sense that the tax break is on the front end, but it offers more flexibility and benefits.
With the end of the year approaching, contributing to a traditional IRA can be a great way to lower your tax bill when you file taxes in 2024 for tax year 2023. Depending on how much, if any, you’ve contributed to an IRA already this year, making extra contributions can save a good amount in taxes. For example, someone whose marginal tax bracket is 22% could potentially save $1,430 in taxes on $6,500 in contributions (the 2023 maximum).
Whether or not you’re eligible to deduct your traditional IRA contributions depends on factors like your filing status, income, and whether you or your spouse are covered by a workplace retirement plan like a 401(k). The IRS uses phase-out ranges where the deductible gradually lowers and eventually becomes non-deductible. The phase-out ranges for 2023 and 2024 are as follows:
| FILING STATUS | COVERED BY A RETIREMENT PLAN AT WORK? | 2023 RANGE | 2024 RANGE |
|---|---|---|---|
| Single | Yes | $73,000 to $83,000 | $77,000 to $87,000 |
| Married, filing jointly | Yes | $116,000 to $136,000 | $123,000 to $143,000 |
| Married, filing separately | Yes | $0 to $10,000 | $0 to $10,000 |
| Married, either filing status | No, but your spouse is | $218,000 to $228,000 | $230,000 to $240,000 |
DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.
3. Check your Social Security earnings record
Social Security will play a big role in many people’s retirement finances, so it’s never too early to begin thinking about it. I always recommend that people check their Social Security earnings record annually. Your Social Security earnings record shows all your earnings that were reported to Social Security.
You can find your earnings record on the Social Security website (SSA.gov). You’ll have to create an account, but it’s pretty straightforward.
In addition to viewing your earnings history, you can find estimates for your Social Security monthly benefit based on when you decide to claim. Some people plan to claim Social Security before or after their full retirement age, so having an idea of how much your benefits will be affected can help with planning.
Checking your earnings record can also help you spot any errors, which is important because your Social Security benefits are based on your earnings. It’s not common, but it does happen. You can generally request a correction to your earnings report online.
