Although it may seem surprising, many of the regular readers of our newsletters will actually spend more time being retired than the amount of time they currently have left in the workforce. Keeping that in mind — in the same way that you see your primary care physician on a somewhat regular basis — it’s important to your financial health to recheck your status on your retirement/investment accounts on a regular basis.
Often times when we’ve met with people who are new to us, it is not uncommon to find some who joined their company’s retirement plan (401K, 403B or similar) and made a decision, at that time, regarding how much to save out of each paycheck, and how to allocate the funds being saved. In all likelihood that decision may have been timely and appropriate at the time of enrollment. For some people, however, that initial decision (we’ve found) has never been updated.
As one’s income — and ability to defer income have increased — the connection to the savings plans have quite possibly drifted apart. That’s not good. Fortunately, getting things back on track is usually fairly easy. Many, or even most, employees can consider increasing their savings amounts to be more in-line with their current incomes. That is a good idea. An even better idea is to go ahead and get it done soon because: Surprise! One morning all people wake up and discover that their retirement self is no longer way out there in the future.
So, for those who have not visited their contributions to their retirement plans for a while, this is a good time to start regular checkups. As my brother says, ‘the best time to plant a tree was twenty years ago, but the next best time is today’. Many companies provide ‘free money’ to their employees in the form of a match of their retirement contributions. For those who have not yet enrolled in their employer’s plans (gasp!), a contribution that is at least enough to obtain the maximum free money is a good starting place. And as always, we suggest that one reconsider their contribution levels each time they experience an income bump — remember that one can choose to have their deductions made on a before-tax basis which makes the contribution more easily incorporated into one’s budget.
Today’s contribution limits are quite high, compared to what there were years ago. A 401k plan today allows a younger person (under age 50) to contribute up to $20,500 a year, and a person over age 50 to contribute up to $27,000 a year. These numbers will increase in 2023 to $22,500 for younger and $30,000 for those over age 50.
For those who do not have the option of a retirement plan at work, the option of an IRA account is available. Today’s limits for an IRA are a contribution of up to $6,000 under age 50 or up to $7000 for age 50 and above. ($6500/$7500 in 2023).
So, everyone has a budget, of course. On the other hand, your retired self will be here sooner than you expect. And retirement living costs continue to climb with inflation. Perhaps today is a good time to either begin your retirement savings, or to increase your retirement savings. There is no time like the present. And your retired self will thank you!
Ron’s Market Minute – Bouncing Along
The major index ETFs got an oversold bounce on Wednesday with the S&P Index* gaining 1.8%, the Nasdaq Index* rising 2% and small-caps advancing 2.2%. These are solid one-day gains, but still within the context of long-term downtrends and within a bear market. All three were quite oversold on Tuesday after the S&P Index and the Nasdaq Index fell 9% in 14 days, and smallcaps dropped 11.28%. Today we are also experiencing a bounce. (Source: FastTrack Data)
At this point, we just have a one day (perhaps two days) oversold bounce within a short-term downtrend, which is three weeks old. Also, this is actually the second up day in the last four. Perhaps a short-term trend change is in the making and a break above last Friday’s high would forge the first higher high (short-term). Even though a higher high would technically reverse the short-term downtrend, I would not consider this a robust signal because the bigger trends are down. The main take-away here is that the long-term trend remains down. The bears are still in charge.
Ronald P. Denk, CFP®
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite D406A
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk