Planning To Retire In 2025? What You Need To Know To Prepare | Global News Avenue

If you expect to retire in 2025, there are some steps you can take to prepare for the next phase of your life.

Before you make the switch from saving to Spend your retirement savingsthis might be a good time to make changes to your investment portfolio, learn about your spending habits, and (if needed) contribute more to your retirement accounts.

Prepare your portfolio for stock volatility

As people approach retirement, experts often recommend making their portfolios more conservative. Despite the S&P 500’s strong performance this year, the outlook for next year remains uncertain, with some analysts warning that the outlook for next year remains uncertain. stock price falls future.

Kevin Khang, senior international economist at Vanguard, noted, bear market Saving early in retirement can severely impact people’s savings in the long run if they’re not careful.

“We have been in an environment of strong stock market appreciation. This environment can make your risk awareness somewhat dull,” Kang said. “One way to prepare for a downturn is to be more conservative or set aside cash. As long as you don’t touch your portfolio and let a temporary bear market materialize, you’ll be fine.”

To avoid depleting your savings during a downturn, Cameron Valadez, CFP at Planable Wealth, advises his clients to invest conservatively as a buffer, such as one to two years of expenses cash equivalents and three to five years of stepped government bond payouts, e.g. treasury bills or Treasury Inflation-Protected Securities (TIP).

“Typically, every five years, we have some kind of market downturn in the 20 to 30 percent range. That’s normal,” Valadez said. “If someone has five years of cash (and bonds), they should be able to weather this storm.”

If possible, consider retiring in stages

If you can, Carolyn McClanahan, CFP, Life Planning Partners, recommends her clients give it a try phased retirement They work fewer hours while still being able to do some of the activities they wanted to do in retirement.

“(Phase retirement) allows you to get used to what you’re going to do when you’re no longer working,” McClanahan said. “It also allows you to control your spending and still earn an income.”

Kristina Benz, director of personal finance and retirement planning at Morningstar, notes that phased retirement may also improve emotional health.

“(Work) makes people feel like they have a purpose,” Bentz said in an October interview. “Work often puts us in contact with other people, which is really good for our brains as we age.”

Increase your 401(k) contributions if necessary

If you’re not confident about how much you’ve saved and are still working, it might be a good idea to save more money in your 401(k).

because Security 2.0some older workers will be eligible to make larger contributions to their workplace retirement plans, such as 401(k)s. Starting in 2025, workers age 60, 61, 62 or 63 can contribute up to $11,250, while all other workers age 50 and older can contribute $7,500.

Michael Griffin, CFP at Henssler Financial, says this rule is especially beneficial for people who didn’t save much when they were younger. “If people have additional cash flow from their own income to make up for those contributions, then that’s a great avenue,” Griffin said.

Evaluate your spending

If you’ve been diligently saving and investing for decades, it’s important to have a spending plan in place in retirement so you don’t deplete your savings.

A common rule of thumb is that retirees will spend approximately 80% of pre-retirement incomebut Bentz recommends that people be more nuanced when planning their spending before retirement.

“Look at your expenses now and what might change in retirement — taxes might change, you might be planning a move, you might no longer commute. Look at all your expenses,” Bentz says. “You can’t predict the future perfectly, but you can at least have a handle on some of the known things about it.”