Saving for retirement is a long-term goal that requires regular check-ins to ensure you’re on track. Conducting a retirement fund checkup doesn’t have to be complicated. Here are five simple steps to help you assess your nest egg and make necessary adjustments for a comfortable retirement.

1. Clarify Your Savings Target

Estimating how much money you’ll need in retirement is crucial. According to the U.S. Bureau of Labor Statistics, the average household headed by someone 65 or older spent $52,141 annually on basic expenses in 2021. This translates to $4,345 per month. Other approaches to retirement savings are based on your age. For instance, Fidelity Investments suggests the following guidelines:

• By age 30: Have the equivalent of your current annual salary saved
• By age 40: Have three times your annual salary saved
• By age 50: Have six times your annual salary saved
• By age 60: Have eight times your annual salary saved
• By age 67: Have ten times your annual salary saved

Your retirement lifestyle and goals can also affect your savings target. For example, you may need more if you’re considering retiring abroad or early retirement.

2. Assess Your Retirement Savings

Once you have a general idea of how much you’ll need, take stock of your current savings. This includes money in retirement accounts like a 401(k) or individual retirement account (IRA), as well as cash savings (excluding your emergency fund). Consider how many years you have until retirement. Is your nest egg prepared to go the distance if you continue saving at the same rate? If not, you might need to increase your monthly contributions.

3. Bump Up Your Contributions

Contributions to your 401(k) are typically made through automatic payroll deductions, making it easy to set aside pretax dollars for retirement. You can choose your contribution amount, which is a percentage of your earnings taken out of each paycheck. You’ll save even more if an employer match is available.

You can make IRA contributions on your own by transferring funds directly into your account. Those who are 50 and older can use catch-up contributions to put more money into a 401(k) or IRA. If you’ve maxed out your retirement accounts, a brokerage account can also be used for retirement income.

4. Consider Your Tax Burden

Saving through multiple accounts can provide tax benefits today and in retirement. For example, you might split your contributions between a 401(k) and a Roth IRA to secure different tax perks. Here’s a snapshot of how retirement accounts are taxed:

• 401(k): Contributions are tax-deductible, reducing your taxable income today. You won’t owe taxes until you make withdrawals, but your tax liability could be significant if a 401(k) is your sole source of retirement income.
• Traditional IRA: Similar to a 401(k), the money you put into a traditional IRA is generally tax-deductible. You’ll also be taxed on distributions you take in retirement.
• Roth IRA: Contributions are not tax-deductible, but you’ll enjoy tax-free withdrawals in retirement. This can help offset your tax liability when you’re no longer working and prevent you from being pushed into a higher tax bracket.

5. Rebalance if Necessary

Rebalancing your portfolio involves adjusting your holdings to align with your risk tolerance and goals. IRAs and 401(k)s are investment accounts that can hold various securities, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). These assets carry different levels of risk, making diversification essential.

The general rule is to assume more risk when you’re younger because you have more time to recover from market volatility. As you age, you’ll likely want a more conservative approach. When reviewing your retirement accounts, check if your asset allocation still feels right. If not, rebalancing might be in order.

The Bottom Line

A retirement fund checkup allows you to assess your nest egg and savings strategy, enabling you to adjust your approach as needed. Think of it as another form of financial maintenance. Just as you check in with your budget and spending, your long-term goals need the same attention.

At O1ne Mortgage, we understand the importance of financial planning for a secure future. If you have any mortgage service needs, don’t hesitate to call us at 213-732-3074. Our team of experts is here to help you navigate your financial journey and achieve your retirement goals.