Retirement

This Is a Good Week to Start Planning for Retirement

By Charles Sizemore  |  April 8, 2019

This is an important week.

It’s not Spring Break, or Mardi Gras… it’s not even Holy Week. And, alas, you won’t get any paid time off work for it.

This week — from April 8 through April 12 — is National Retirement Planning Week!

Okay, I’ll be straight with you… I’ve never heard of National Retirement Planning Week, or the Insured Retirement Institute that has proclaimed it to be a thing. But in Peak Income, we cover a lot of retirement basics, and this seems like as good a reason as any to focus on a few of those basics. So, hats off to the Insured Retirement Institute for putting this on the calendar.

Before you start to groan, don’t worry. I’m not going to do too much of my customary nagging for you to save more. Instead, we’re going to make an easy checklist of things you can do to get organized. Think of it as a little financial spring cleaning.

Less Is More

Most people’s finances are a hot mess. And I don’t mean that they live paycheck to paycheck, or that they’re failing to save money. Chances are that you’re more responsible than the average Homer Simpson out there, and that you actually have a decent pot of savings.

But if you’re like most people, you probably have accounts all over the place.

Repeat after me: Less is more!

There is really no reason for a married couple to have more than two or three bank accounts. My wife and I keep separate accounts at the same bank because we don’t want to accidentally overdraft each other. We also have a savings account where we sweep excess cash that we’re likely to need within the next few months. That’s it. You don’t need accounts at every bank in town. It’s just more to keep up with.

The same is true of credit cards. My wife and I have a credit card we use for day-to-day purchases and a backup card we use in the event our primary card gets lost, stolen, or hacked.

Most people I know have a good half dozen to a dozen credit cards. Why? It’s just more statements every month and more online logins to remember. And if you’re not watching it like a hawk, you might miss a payment and get stuck paying interest for no good reason.

If you have multiple cards, winnow them down to the one or two that offer the lowest interest rate or best rewards (air miles, etc.) and put the rest through the shredder. Make sure you call and cancel any with annual fees that you’re not using.

Try to consolidate multiple 401k or IRA accounts, too. At a max, you should have one 401k plan, maybe one traditional rollover IRA per person, and maybe one Roth 401k or Roth IRA person*. If you have more than that, consolidate. It’s easier to manager a few larger accounts than a smattering of smaller accounts.

*There are exceptions if you are doing advanced tax planning, such as a Roth conversion, but that’s a longer story for another day.

Prioritize Your Saving

I’m convinced some people just like paying taxes. They’re responsible and have a good emergency cash cushion. Yet they stockpile their savings in the bank rather than in their company 401k plan or other tax-deferred account, meaning they’re not getting any tax break.

Why?

I think it ultimately comes down to fear. A lot of conservative investors are afraid of the stock market in general and afraid of tying up their funds until they reach retirement age.

Well, on the former fear, I agree. With stock prices where they are today, I’m not putting much of my 401k contributions into buy-and-hold stock positions. But on the latter, I can’t disagree strongly enough. Once you have an emergency cash fund in place and any savings you are setting aside for a specific purpose — such as buying a house — you should dump every penny of savings you can into your 401k plan.

Why wouldn’t you?

If you’re making traditional 401k contributions, you get a tax break immediately. And you’re making Roth 401k contributions, your dividends, interest, and capital gains are tax free. Worried about the stock market? Then keep your 401k balance in a bond or money market account. No one ever said your 401k has to be invested in stocks.

You can put up to $19,000 into a 401k this year, or $25,000 if you’re 50 or older. If you’re already maxing out these amounts, then congratulations! You are winning at life. And if you’re not, you have a specific goal to aspire to.

Get Help?

I’m the independent sort who doesn’t like to ask for help. I prefer to do my own research and make my own decisions. I know when I need help though.

There are plenty of things I can’t realistically do on my own, such as draft a proper will and testament. Sure, I could use a boilerplate document off the internet. But I feel a lot better knowing a reputable attorney drafted the document that will ultimately determine how my wife and kids would be provided for if I were to get hit by a bus on the way home from work.

Fully 75% of Americans manage their finances completely on their own, without any help from an advisor or even an online service. Let’s face it. For most people, that means the finances aren’t being managed at all.

If you’re intimidated by financial planning, hire someone to sit down and do a proper planning session with you.

You might also check out Peak Income. Though I’m not allowed to give specific investment advice, I do touch on a wide range of retirement topics, many of which you’re not likely to read about elsewhere.

You might find it worth your time…

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Charles Sizemore

Income and Retirement Strategist, Charles Sizemore, CFA specializes on dividend-focused portfolios and building alternative allocations by finding value opportunities outside of the mainstream stock market.

Charles is the executive editor and portfolio manager for Dent Research's premium newsletters, Peak Income and Peak Profits.

He is also a frequent guest on CNBC, Bloomberg TV, Fox Business News and Straight Talk Money Radio, and has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post. He is a frequent contributor to Forbes, GuruFocus, MarketWatch and InvestorPlace.com.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. MORE FROM AUTHOR