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20 Years Out - 8 Recommendations to Prepare for Retirement Thumbnail

20 Years Out - 8 Recommendations to Prepare for Retirement

Financial Planning Insights Investing Behavioral Finance Retirement Planning

One of the most frequent concerns of younger clients and prospects is ‘what can I be doing to plan for retirement even though that might be decades away.  In a shortened week before Christmas, I have compiled a list of 8 recommendations for what to do when you are 20 or more years from retirement.

1. Fully fund an emergency fund of three to six months of living expenses to avoid tapping into your 401(k) or home equity in the event of an emergency.

2. Boost your earning potential and benefits package now by contributing the maximum annual amount to your 401(k), or at least enough to receive a full employer match.

3. Contribute money to a ROTH IRA or other account to make sure you are saving in a tax-optimized manner.

4. Coordinate your insurance needs with your employer’s benefits package to be sure you have adequate coverage should you become disabled (long-term disability) and evaluate the level of life insurance you need.

5. Ensure you have a diversified investment portfolio so that you are investing for growth and create tax diversification by allocating assets across taxable, tax-deferred, and tax-free sources.  Consolidate multiple retirement accounts and/or brokerage accounts you may have.

6. Make sure you have basic estate planning documents in place (i.e. a will, durable power of attorney, possibly a revocable trust, a living will, healthcare proxy, etc.)

7. Set a benchmark “magic number” for an adequate retirement fund and establish a step-by-step plan for reaching your goal.

8. Do not sacrifice your retirement to put your children through college. It is possible to take out loans for college but not for retirement.

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