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New Year, New You! Planning Toward A Comfortable Retirement in 2021

There has never been a better time to start planning for retirement. And, that’s not just because it is generally true that you should start retirement planning as soon as you start working. The past year has been exceptional, both in how hard it has been and in how it has altered the financial planning landscape. Many have lost small businesses, forcing a savings plan re-evaluation; many more are facing a new business landscape where old structures need to be rethought. The introduction of the SECURE Act in late 2019 brought big changes to legislation concerning 401(k) plans, IRA contributions, and required minimum distributions (to name but a few of its effects). Finally, at the end of 2020 Congress renewed aspects the CARES Act, but left many of the retirement provisions out of the new Consolidated Appropriations Act of 2021.  All of this is reason to take a fresh look at your retirement planning. 

Key Questions You Need to Ask in the New Year:

  • Is Your Risk Tolerance Calibrated to the New Normal?

After March 2020 saw the fastest bear market crash in the history of the S&P 500, stocks rallied throughout the rest of the year and closed December at record levels.  Some analysts worry that this recovery is too good to be true, though. In such a volatile climate, anyone worried about a big dip in their retirement savings should reassess their portfolio’s risk exposure.

  • Should You Up Your 401(k) or IRA Contributions?

The SECURE Act made it easier for small businesses to set their employees up with 401(k)s, pushed back the age by which participants need to begin taking required minimum distributions (RMDs), and allowed indefinite contributions to traditional IRAs. This all made retirement saving easier (sort of). If you have been lucky enough to hold on to a fixed income through the pandemic, there is every reason to put as much toward retirement saving as you can right now. 

  • How Can I Recover Retirement Saving Lost in 2020?

The CARES Act loosened restrictions on hardship loans from 401(k) plans, allowing those who suffered cataclysmic loss a quick fix to shoring up their finances. While the usual 10% penalty for such withdrawals was waived, income tax must still be paid on any borrowed money not repaid within three years. That, and the longer this money is out of your retirement account, the longer is fails to earn interest. This means you need to start drafting a repayment plan now for any dip made into your savings. A comprehensive retirement plan is the best way to do this.

Preparing for retirement is not a one-and-done sort of task and there is no one-size-fits-all approach. Everyone comes to the subject with a different financial background, different goals, and a different family structure and all of these variables are subject to continuous change. This is why the most successful retirement plans are those drafted in consultation with an experienced estate planning attorney and regularly kept up-to-date. 

The challenges of 2020 underscored the need for a plan for those without one and the need for an update for those with. Reach out to our office today and we will ensure your planning is on track no matter how shaken it may have been by the last twelve months.

Monique Hineline

Smith & Smith are very professional, informative, and relatable with examples and stories to ease the estate planning process. I had the best time at their lunch and learn. Even if you already have your estate planning in place I highly recommend attending a lunch and learn. Thanks Smith & Smith!