I’m a Financial Advisor: 5 Money Moves To Make If You’re Planning To Never Retire
According to a 2023 retirement survey from the TransAmerica Center for Retirement Studies, 19% of Americans do not plan to retire. If you’re one of those people, your financial planning will likely look different than that of someone who is counting down the days until they can pack up their office.
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From how you contribute to your retirement accounts to reconsidering your estate-planning strategy, here are money moves to make, according to a financial advisor, if retirement is not on your radar.
Consider Continuing Contributions to Retirement Accounts
Matt Hylland, financial advisor at Arnold and Mote Wealth Management, said that you can still contribute to retirement accounts like 401(k)s and IRAs as long as you have earned income, regardless of your age.
Keep in mind, however, that even though there are no age limits for contributing, there are monetary limits. However, if you’re over 50, you can benefit from catch-up contributions. For example, regarding IRAs, the limit on annual contributions is $7,000, but people over 50 can also make catch-up contributions of $1,000, bringing the total to $8,000.
However, it would be wise to speak with your financial advisor as to whether or not this is a good strategy for you. “Making contributions may not make sense if you have adequate retirement savings in case you are forced to retire,” said Hylland.
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Consider Adjusting Your Withdrawal Rate
You may have heard of the 4% withdrawal rate in retirement, which means, once you retire, you total up all of your investments and withdraw 4% of the total during your first year.
“The 4% rule is a guideline that suggests withdrawing 4% of your retirement portfolio and adjusting for inflation in subsequent years,” said Hylland.
However, if you’re planning to never retire, you might want to adjust your withdrawal rate to accommodate a higher level of spending if you do ever stop working. The 4% withdrawal rate assumes a 30-year time horizon. However, if you retire at 85, it’s unlikely that you will live to 115, so you could potentially withdraw your money at a higher rate.
‘Double-Dip’ If Needed
“You can work and collect Social Security at the same time,” Hylland said. However, he pointed out that if you start collecting your Social Security benefits before your full retirement age, which is between 66 and 67, depending on when you were born, your benefits may be reduced.
Additionally, if you wait until age 70 to begin collecting Social Security, your benefits will increase. But there’s no reason to hold out any longer. “Waiting beyond age 70 will not increase your benefits,” Hylland added.
Take More or Less Risk With Your Investment Portfolio
Which path you choose depends on your financial situation.
“If you are not planning to retire, you might opt to take more investment risks, especially if you have a stable income and can afford to wait out market fluctuations,” explained Hylland. “If you do not have stable income and/or you do not have a lot of retirement savings, it could make sense to have less risk.”
Reconsider Your Estate Planning Strategy
Hylland said that estate planning remains crucial whether you retire or not.
“This includes setting up wills, trusts, healthcare directives and powers of attorney,” he said. “Meet with an estate planning attorney to get started.”
James C. Bartholomew, an estate planning attorney who owns his own firm, had further insight.
“Generally, if you are not planning to retire, you will continue to accumulate and build wealth over your entire lifetime rather than transitioning to drawing down at some point, and that can have important impacts on estate planning and makes setting up an estate plan all the more important,” he said.
Bartholomew said that because your estate will likely continue to grow if you don’t retire, it’s more likely that your estate will owe taxes when you pass away. “This implicates estate or inheritance taxes in many states and perhaps even implicates the federal estate and gift tax, depending on the specific numbers — the federal lifetime exemption is currently $13.61 million,” he explained.
Therefore, planning accordingly may result in significant savings for your beneficiaries, Bartholomew added.
Other Moves People Should Make
Hylland recommended these additional moves if you’re not planning to retire.
Continue to maintain or grow your emergency fund.
Manage your debt; lower levels of debt can provide more flexibility and security.
Continue to invest in yourself by updating your skills and learning new ones.
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: 5 Money Moves To Make If You’re Planning To Never Retire
