Freedom is often cited as a benefit of retirement. Many professionals look forward to the day when they retire and have more free time and the freedom to spend that time however they choose. Of course, the opportunity to spend retirement how one sees fit typically requires considerable financial freedom.
Financial planning for retirement is often emphasized to young professionals beginning their careers. But it’s equally important that people on the cusp of retirement continue to look for ways to protect and grow their wealth. As retirement draws near, professionals can consider these strategies to ensure they have the financial freedom to make their golden years shine even brighter.
Plan to grow your wealth in retirement. It’s widely assumed that retirees need less income after calling it a career because the need to save for retirement is no longer present. However, some expenses, including health care, may rise in retirement, which underscores the need to continue growing your wealth. Cost-of-living also will increase over the course of your retirement years, which highlights the need to keep growing wealth in retirement. It can be tricky to protect your existing retirement savings as you approach the end of your career while also growing that wealth, so it is best to work with a financial planner to navigate that situation.
Maintain a mix with your investments. A model from the Schwab Center for Financial Research indicated that a hypothetical retiree with a $2 million portfolio in year one of retirement will have slightly less than $1 million left 30 years later if her portfolio maintains a mix of 60 percent stocks and 40 percent bonds and cash. The model found that a second hypothetical investor with the same size portfolio in year one of retirement will run out of funds prior to year 29 if his portfolio is 20 percent stocks and 80 percent bonds and cash. Though conventional wisdom suggests limiting risk as retirement nears and eliminating it entirely upon retiring, modern retirees are living longer and may therefore need to maintain a mix of investments to ensure they don’t outlive their money.
Make the maximum allowable contributions. Many aging professionals may not have saved as much for retirement as they might have hoped to upon starting their careers decades ago. In fact, a 2024 survey from Prudential Financial found that many 55-year-olds have fallen far short of establishing the level of financial security they will need in retirement. The Prudential survey found that 55-year-olds had a median retirement savings of less than $50,000, a number that falls considerably short of the recommended goal of having eight times one’s annual income saved by this age. If that situation sounds familiar for professionals nearing retirement age, then now is the time to begin catching up. Make the maximum allowable contributions to a 401(k) plan ($23,000 in 2024) and/or an IRA ($7,000). In addition, the Internal Revenue Service notes that IRA catch-up contributions remained $1,000 for individuals age 50 and over in 2024.
Retirement can provide a sense of freedom professionals have worked hard to achieve over the course of their careers. Some simple strategies can help professionals on the cusp of retirement achieve the financial freedom they’ll need to enjoy their golden years to the fullest extent.
