WHAT TO DO THE DAY YOU TURN 55

You’ve made it to your 55th birthday! Congratulations on celebrating such an important milestone. Why is 55 a milestone, you ask? Well, there are a few retirement-related tasks you should start checking off your list now so you’re well prepared to enjoy your retirement in the next 5-10 years. 

REVIEW YOUR RETIREMENT PLAN

As you near your retirement date, it’s more important than ever to ensure your retirement plan is aligning with your goals. One of your top priorities should be to review your asset allocation and make changes if necessary. The closer you are to retirement, the less time you have to recover if the market takes a hit. Therefore, your assets should be allocated more conservatively.

At 55, you can more accurately predict your projected earnings up to your retirement date. Knowing your projected earnings lets you estimate the Social Security benefits you expect to receive with more precision, allowing for more detailed income planning. You can estimate your Social Security benefits by creating a my Social Security account on the SSA website. 

Reviewing or changing your asset allocation and more accurately estimating your Social Security benefits gives you a better idea of the resources you’ll have during retirement. At this point, you can begin planning how you’ll structure your retirement income withdrawals now that you have a clearer understanding of your situation.

REVIEW YOUR ESTATE & INSURANCE PLANS

The year you turn 55 is also a good year to conduct a thorough review of your estate plan and insurance needs. Review your wills, trust documents, and beneficiaries to make sure your estate is properly designated to the correct recipients in the correct amounts in the event of your death. 

Your children are likely approaching adulthood and may even be graduated from college (or soon to graduate) the year you turn 55. Once they’ve flown the nest and are providing for themselves, you don’t have as much of a need for a big life insurance policy. Reviewing and reducing your insurance policies could help you save a lot of money from those premium payments.

PRIORITIZE YOUR “CATCH-UP” CONTRIBUTIONS

Speaking of saving, when you turned 50 you became eligible to make “catch-up” contributions to IRAs and your 401(k) or 403(b). Pre-retirees over 50 can contribute an additional $1,000 to their IRAs above the maximum $6,000 currently allowed. You can also contribute an additional $6,500 to 401(k) and 403(b) accounts in 2021, although this limit may change in the future.

Up until now, you haven’t been able to make catch-up contributions to your HSA. But now that you’re 55, you can also contribute an additional $1,000 to your HSA. If you’re not already making these catch-up contributions, it could be in your best interest to take advantage of these additional tax-friendly opportunities now. 

RETIRING EARLY?

The “Rule of 55” is a little-known retirement provision that might allow you to access a portion of your retirement funds sooner if you’ve been planning to retire early. Basically, if you leave your job for any reason at any point during the year you turn 55 (or any year after that), you can begin taking penalty-free withdrawals from your 401(k) account.

For example, if you leave your job in January of the year you turn 55, you can begin accessing funds from your 401(k) when you leave. If you left the prior year (the year you turned 54), you wouldn’t be able to take advantage of this provision. The “Rule of 55” only applies to the 401(k) associated with the job you’re leaving. Other 401(k)s and IRAs do not qualify for this provision. 

If you think you might be pressured to leave your company early or your company is at risk of layoffs, discuss how this provision might impact your retirement plans with your financial advisor. Even if you’re not planning on retiring early, knowing about this rule can help you protect yourself and plan for unforeseen circumstances in your final working years.

YOU CELEBRATE, WE’LL HELP WITH YOUR RETIREMENT PLAN

The day you turn 55 should be a fun day of celebration. It should also be a time for intentional planning. At Gibbons Financial Group, we help answer important questions and make rational decisions so you have more clarity about your retirement. 

Request a free retirement income analysis to see how likely you are to reach your goals based on your current retirement plans, or set up a meeting with us to learn more about how we can help you by calling 224-419-5550 or emailing [email protected].

ABOUT MIKE

Michael J. Gibbons is founder and president of Gibbons Financial Group, an independent advisory firm providing custom-tailored financial planning and investment management services to pharmaceutical and healthcare professionals and their families. Mike has over 25 years of experience and spends a significant portion of his day working with pre-retirees and retirees, focusing on asset management, Social Security and pension planning, as well as retirement income preparation. 

Mike has degrees in both business and psychology from Lake Forest College and currently holds his Retirement Income Certified Professional (RICP?) designation from the American College. Mike was named a Five Star Wealth Manager for 2016 and 2018* Mike is heavily involved in his community, having served on the Village of Gurnee Police Pension Board as a Community Volunteer and the St. Patrick’s Parish Financial Board. When he’s not working or volunteering, Mike loves playing golf and spending his time with his wife and children. To learn more about Mike and how he can help you, connect with him on LinkedIn, visit his website, and register for his free webinar, Retiring Early From Pharma, created specifically for professionals retiring from the pharmaceutical, biotechnology, and healthcare industries.

*Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2016/2018 Five Star Wealth Managers.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.