As we approach the end of the year and the start of 2025, this is an ideal time to reflect on your financial goals and make resolutions that will position you for a successful retirement. In this article, we’ll cover the top six essential financial resolutions worth considering and implementing in the new year.
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Here are the Top 6 Financial Resolutions To Make Before Retiring in 2025
1. Maximize Your Contributions
One of the most effective ways to bolster your retirement savings is to maximize your contributions to retirement accounts like 401(k)s, IRAs, or 403(b)s. If you’re still working and receive a pay raise in 2025, consider increasing your contribution percentage by the same amount. For example, if you receive a 3% raise, increase your retirement contribution by 3%. This strategy helps you save more while minimizing the impact on your take-home pay.
For 2025, contribution limits are generous:
- 401(k) Contributions:
- Under 50 years old: Up to $23,500
- 50 years and older: Additional catch-up contribution of $7,500, totaling $31,000
- IRA Contributions:
- Under 50 years old: Up to $7,000
- 50 years and older: Additional $1,000 catch-up contribution, totaling $8,000
Utilizing these limits can significantly enhance your retirement nest egg.
2. Reassess Your Allocation
Regularly reviewing and adjusting your investment allocations helps align them with your current financial goals and market conditions. If you have a 401(k) or other retirement account, consider whether your current investment choices still make sense given your proximity to retirement and the current market environment.
For example, if you previously selected a target-date fund or a bond fund, you might have missed potential gains as the market recovered from downturns. Working with a fiduciary adviser can help you evaluate your options and make informed decisions that suit your individual needs and risk tolerance.
3. Minimize Your Taxes
No one wants to pay more taxes than necessary. There are several strategies you can employ to reduce your tax liability each year:
Contribute to Retirement Accounts – Contributions to traditional 401(k)s and IRAs can reduce your taxable income for the year.
Charitable Giving – Donating to charitable organizations can provide tax deductions. Consider setting up a donor-advised fund, which acts like a charitable savings account. You receive an immediate tax deduction when you contribute and can decide later which charities to support.
Manage Dividends and Interest – Be mindful of ordinary and qualified dividends from your investments, as well as interest income from bank accounts and CDs. Ordinary dividends are taxed at your regular income tax rate, while qualified dividends are taxed at the lower capital gains rates. If you’re paying taxes on investment income that you’re not using, reallocating assets to be more tax-efficient may be beneficial.
Deciding when and how to claim Social Security benefits is one of the most important financial decisions you’ll make. While many sources suggest waiting as long as possible to claim benefits to maximize monthly payments, this may not be the best strategy for everyone.
Consider factors such as your health, life expectancy, and financial needs. For some high-net-worth individuals, claiming benefits earlier might make sense. Additionally, coordinating benefits with your spouse and exploring strategies like voluntary suspension can help optimize the total amount you receive over time. Working with a knowledgeable adviser can help you develop a personalized Social Security claiming strategy.
5. Review Your Healthcare Coverage
Healthcare costs can be a significant expense in retirement, especially if you retire before becoming eligible for Medicare at age 65. If you retire early, you’ll need to plan for healthcare coverage through options like COBRA, the Affordable Care Act marketplace, or private insurance, which can be costly.
Additionally, your healthcare premiums could be affected by your income. By managing your taxable income, you might qualify for subsidies that reduce your healthcare premiums before age 65. After enrolling in Medicare, your premiums for Parts B and D are also income-based, potentially leading to higher costs if your income exceeds certain thresholds. Developing a healthcare coverage strategy that considers your income and healthcare needs is essential.
6. Dream About Your Ideal Retirement
Finally, take time to envision what you want your retirement to look like. Planning for retirement isn’t just about finances; it’s also about lifestyle. Discuss your retirement goals with your spouse or partner to ensure you’re both aligned. Whether you plan to travel, pursue hobbies, volunteer, or even start a new business, having a clear vision will help you create a retirement plan that supports your dreams.
Financial Planning for Retirement Success
Preparing for retirement involves more than just saving money; it requires careful planning and strategic decision-making. At REAP Financial, our team of fiduciary advisers specializes in helping high-net-worth individuals and families navigate the complexities of retirement planning. From maximizing contributions and minimizing taxes to crafting personalized Social Security and healthcare strategies, we’re here to guide you every step of the way.
Located in Austin, Texas, REAP Financial offers comprehensive financial planning tailored to your unique goals and circumstances. Schedule a complimentary consultation today to discover how we can help you achieve a confident and fulfilling retirement.
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