The End-of-Year Financial Checklist for Retirees

Years of financial planning and saving have set you up to get the most out of your retirement. But in between whittling down your bucket list and virtual visits with the grandkids, it’s important to take some time at the end of the year to check in on your finances. Now that you’re drawing income from your savings, you’ll want to evaluate your spending for the year and plan for next year. Here’s a financial checklist for retirees to help keep your peace of mind in retirement.

Your RMDs: In a typical year, you would be required to take RMDs from tax-qualified accounts like a traditional 401(k) or IRA starting April 1 of the year following the year in which you turn 72. However, due to the CARES (Coronavirus Aid, Relief and Economic Security) Act, required minimum distribution (RMD) rules are waived in 2020 for IRAs and certain defined contribution plans, including 401(k), 403(b), 457(b) plans administered by a governmental entity. It’s important to note that RMD rules for nongovernmental 457(b) plans, defined benefit plans and nonqualified annuities have not changed.

Keep wills and trusts up to date: Review your wills and/or revocable living trust to ensure you have the appropriate executors, trustees and guardians in place. Also, you’ll want to make sure your beneficiaries are up to date — especially if you’ve welcomed a grandkid or two to the family. Remember, wealth isn’t a prerequisite for building an estate plan. Everyone, regardless of net worth, should have one in place.

Rebalance your portfolio: In retirement, it’s still important to own stocks, bonds and other assets in your portfolio. Over the year, depending on what happened in the market, your exposure to stocks, bonds or other assets may have grown too large or too small for your preferred level of risk. Rebalancing your portfolio brings your asset allocation back in line with your comfort level. 

Review charitable giving: Discuss charitable gift-giving strategies with your advisor or tax attorney for income tax deductions and to provide immediate and future benefits to charity over time. If you’re 72 or older, consider charitable distributions from a qualified retirement account — up to $100,000 per year. That distribution is excluded from income and satisfies RMDs (which are waived in 2020).

Review annual and lifetime giving: You may want to consider giving income-producing assets to children in lower income brackets to reduce the family’s overall tax burden. If you have a large estate, you may want to take advantage of favorable current tax exemptions to make large gifts to dynasty trusts that can endure for multiple generations. The 2017 tax law effectively doubled the gift, estate and generation-skipping transfer (GST) tax exemptions. However, that may not be the case if tax policies are altered in the future.

Update your budget: Review your 2020 spending and build your budget for 2021. Sticking to a budget can help you understand where your money is going and if it's time to eliminate some expenses that may not be as important to you. You can build in any big-ticket expenses you anticipate in the coming year — medical procedures, travel, etc. Budgeting in retirement is important, given you’re living on the savings you’ve amassed as well as other guaranteed, fixed income streams. Balancing spending with your savings will help you make your money go farther, while making sure you’re able to spend on the things that are important today.


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