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Within 10 years of retirement?

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Michelle Blog PhotoRetirement provides a chance to enjoy the fruits of one's labor. However, a pleasurable retirement requires proactive and thorough planning. As you near retirement age, take stock of your financial situation to make sure you are on track. If you are not where you should be, don’t fret. You still have time to change the outcome. Take advantage of opportunities to beef up your savings and prepare for a financially secure retirement. Here are six steps you can take in the final stretch to help you prepare for a comfortable retirement. 

  1. Save, save, save! The key to a secure retirement is building up your personal retirement savings to supplement what you will receive from Wisconsin Retirement System and Social Security. This becomes increasingly important as national trends indicate a shift from a defined benefit plan model where workers receive pension benefits based on years of service and final salary to a self-funded model.
  2. Play catch up. Remember, as you close in on retirement you have less time to build up your nest egg. So, don’t miss out on savings opportunities. If possible, max out your contributions in tax-advantaged savings accounts like a 403(b) and IRA. Plus, consider catch-up provisions if you are 50 years of age or older to help top off your savings. The 2013 annual 403(b) contribution limit is $17,500. Those 50 years of age and older may contribute an additional $5,500 or a maximum of $23,000. The 2013 IRA maximum contribution is $5,500. Contribute an additional $1,000 if you’re age 50 or older.
  3. Review your asset allocation with a financial professional. No matter how many years you are from retirement, make sure your investment portfolio reflects your investment horizon. Member Benefits offers three fee-based financial planning services to help members prepare for their financial future.
  4. Put five years of fixed investments in a bucket. People with mutual fund (equity) investments worry about their investments losing value because of poor stock market performance at the time they need to make withdrawals. Having enough money for five years in a fixed account at retirement is a strategy often called the ‘bucket approach.’ This allows you to withdraw from two different buckets depending on the state of the stock market. Withdraw from the fixed investments bucket when the stock market performs poorly and from the bucket with the equity investments when the market is doing well.
  5. Reduce your debt. Plan to pay off all non-mortgage debt before you retire. If you can afford to pay a bit extra on your mortgage while you are still working, do that, too.
  6. Explore the benefits of “tax diversification.” Many experts advise having a combination of before-tax and after-tax (Roth) retirement accounts. The Roth allows you to diversify your tax liability in retirement since most other sources of income (WRS and Social Security benefits) will be taxed as regular income. Roth savings may also be a good choice if you wish to pass along assets to your heirs.