Get Ready For 2021 With This 5-point Retirement Checklist

Dec 17, 2020 | Lena Rizkallah, JD, CRPC®

If you’ve been semi-conscious this year, you’re probably feeling like most people and eager to move on.  While 2020 has been an unusually challenging year for most people and we are counting down the days until 2021, it’s important to tie up loose ends before heading into a new year.  When it comes to retirement, year-end planning is key to making sure you’re on track with your plan, maxing out your savings and taking advantage of strategies to help you get ready for 2021.

Here is your 5-point retirement checklist:

  • Review your financial plan with your financial advisor.  End of year is a great time to check in with your advisor, not only to review your portfolio and ask questions about the market, but also
    1. To review the goals that you initially set out and determine whether there are any changes. 
    2. If you haven’t already, use a retirement calculator to calculate how much you may need to save for retirement and to gauge whether you are on track.  If not, talk to your advisor about the appropriate adjustments to saving, spending and investing to get you on the right track. 
    3. Now is also a good time to review and rebalance your portfolio, selling winners and reinvesting in promising asset classes.
  • Max out retirement plan contributions.  Be sure to take advantage of any tax-deferred saving that is available to you.  Tax-deferred growth over the long term is one of the most effective ways to save for retirement.
    1. If you are under age 50, you can contribute up to $19,500 in pre-tax contributions to your employer plan for 2020. 
    2. For individuals age 50 and over, you can contribute $26,000.  Make sure to make these contributions by the end of the year.
    3. To make your IRA contribution for 2020 ($6,000/$7,000 age 50 and over), you have until April 15, 2021 to contribute.
  • Consider a Roth conversion.  A Roth account is a great way to save for the long-term because like a traditional IRA, you get the tax-deferred growth along the way.  However, contributions to a Roth IRA or Roth 401(k) are made with after-tax money and qualified distributions will be tax-free.  Roth IRA distributions tax-free if made 5 years after the initial contribution to the plan and you are over 59 1/2.
    1. Some people choose to take some or all money from a traditional IRA and convert that amount to a Roth IRA.  Note that any pre-tax money that is converted is subject to income tax in the year of conversion.
    2. Creating a Roth account may help you to achieve tax diversification in retirement. This can help you to mitigate and manage taxes well into retirement.
    3. Because money that is converted to a Roth is taxable, consider making conversions during low-income tax years, when you are on family leave, on sabbatical, during periods of unemployment or when you go back to school. 
  • Review wills, trusts and beneficiary designations. Let’s face it, life happens.  People get divorced, have children, move, buy property, get in huge family feuds!  It’s important to review wills and trusts to make sure these documents are complete and stay up to date with your assets and wishes.  Retirement accounts like IRAs and 401(k)s as well as annuities have beneficiary designations which bypass the terms of wills and trusts.  This means that your IRA account will pass to the person you name as beneficiary regardless of what your living trust says.  Accounts with beneficiary designations bypass the probate process in most cases, so make sure you still like the people you name as beneficiaries!

End of year is a good time to tie up loose ends and review financial goals and documents.  Meet with your advisor to review your plans so that you know you’re on track for 2021.  And if you don’t yet have a financial advisor, now is a good time to find one!