financial goals

2022 Year-End Retirement Planning Checklist

three women at the table-year-end retirement plan checklist

It is hard to believe that the new year 2023 is around the corner!

I do not know about you but I cannot wait! Financially, 2022 was a challenging year. According to Goldman Sachs, ‘2022 is likely to end up as the sixth-most volatile year since the Great Depression’. The volatile stock market and the daily reminders of high inflation and rising prices on everything will likely make you worried about the cost of your future retirement.

But the most important lesson I learned over the past years, including the global pandemic, is that there are rewards to being prepared. I truly believe that the year-end retirement planning checklist is a great way to look back at 2022 and make sure you are on the right path to achieve your retirement goals in 2023.

Below is a helpful list of 10 tasks to complete before 2022 comes to a close.

1. Create financial goals for the next year.

Do you know how much money you need to retire? What are you going to do about rising inflation? How is it going to affect your retirement income?

How much will it cost to help your parent’s long-term care needs, pay for your healthcare in retirement, or pay for the vacation you really want?

Maybe none of that applies to you today but you want to know how to project into the future. It is important that you know how much you will need to live the life you want in retirement.

What other financial goals do you have?

2. Set a target retirement age.

Retirement is the one common financial goal we all share. We all need to plan for the day when we can no longer work or are just ready to retire.

The target date is the year closest to the year you plan to retire. Age 65 used to be the magic number, the age at which most people retire. Yet that golden age has changed. Many people are working longer. Even though they may want to retire, it is not always possible because they do not have enough money to retire.

Take some time to set a realistic target retirement date. Based on your estimated retirement income and expenses, you can plan your own retirement strategy.

Looking at your target retirement date and retirement income, you can determine if you have enough money saved for the next 20 to 30 years. If it is not enough for a comfortable retirement, move the date and save more in your retirement funds.

Just remember that where you live and how much you can afford to spend in retirement will impact your retirement lifestyle.

How Do I Decide When Best to Retire?

3. Look at your spending.

The end of the year is a great time to look at your personal spending and see where your money is going. This year has been full of change and adjustment. With many people working remotely, there is a good chance your spending habits have changed as well.

How did you do this year? Have you tracked your spending against your budget? Did you get a full picture of your finances and know how much money you have saved (or not) in 2022?

If you have struggled this year, decide how to improve your financial situation for the next year. Are there debts you should be making a priority to pay off? Look at your budget and decide if there were parts that were difficult to stick to.

Look at your credit card and bank statements and see what expenses could be avoided this year. Then set up a budget for the next year and decide on how much money you need to save in 2023 to meet your retirement goals.

4. Get a clear picture of your spending in retirement.

Do you know how are you going to pay for your retirement years?

First, think about your current overall cost of living. Then, think about if you have enough income to sustain your current lifestyle in retirement?

Calculate how much is your nest egg.

When you are near retirement, it is important to know how much money you will need to live comfortably for the rest of your life.

If you still have no idea how much money you will need, look at your current expenses and then evaluate how they might change in the future.

When you retire, you do not need a lot of things that you did when you were working. Generally, the costs of commuting, take-out lunches, and business clothes will go down. However, you might start spending more money on travel, hobbies, and activities.

Calculating your nest egg is easy if you already have a budget and know how much you spend now. The next step is to get a clear picture of how it might change in the future based on your retirement lifestyle.

Retirement Budget in 5 Simple Steps

Another option to figure out how much money you need to retire is to replace 70 to 80 percent of your annual pre-retirement income. For example, if you earn $70,000 per year before retirement, you should expect to live off $49,000 to $56,000 per year.

5. Review the source of your retirement income.

In my year-end review, I always find time to look at our future retirement income.

I usually look at our current Social Security, retirement, and investment funds statements to get a clear picture of our potential retirement income. I wanted to make sure that we are on track to our retirement goals and have enough money to cover our living expenses when we stop working.

When you are working, you typically have a single employer and a single source of income – your salary. In retirement, everyone has different sources of income – Social Security, pension, part-time job, investments, and retirement savings (401k, IRA, Roth IRA, Roth 401k).

To make your assets last through the next 20 or 30 years, use the rule of thumb to withdraw 4 percent of your retirement money annually. For example, if you have $500,000 in retirement funds, you can spend roughly $20,000 ($500,000 x 0.04) per year when you retire. Add this number to your Social Security, pension, and other savings, and calculate if it is enough to support the retirement of your dreams.

Helpful Articles:

6. Check your progress on paying down debt.

The end of the year is a great time to sit down and check your progress on paying down debt.

Ideally, you should be entering the retirement debt-free, but in the real world that is not always achievable. So, it may be okay for you to retire before you pay off your big debt like a mortgage, cars, and student loans.

Just make sure you understand the implications of retiring with debt because big withdrawals from retirement funds could push you into a higher tax bracket.

Yet, if you have several years before retirement, try to reduce your debt so you will have more money available for your lifestyle in retirement.

Pay off all credit cards and personal loan debt.

When it comes to debt, plan to pay off high-interest rates debt first. Credit card APRs have increased this year with the average rate around 19 percent. A credit card debt has become the most expensive debt for many people.

By reducing the existing debt and limiting new debt you can minimize the amount of retirement income that you will spend on interest payments. For example, if your monthly retirement budget includes a $350 car payment and a $700 credit card payment, you will obviously be able to spend $1,050 a month less than someone without those bills.

If you pay off a credit card that charges 19 percent interest, it’s like earning 19 percent on a risk-free investment.

Your mortgage.

Once, you paid off your credit card debt, start planning on paying off your mortgage. If you have a low-interest rate, you can plan to pay off the mortgage early by making “extra” mortgage payments each month.

With a mortgage paid off before retirement, you will have the extra money you need to travel in style or spoil your grandkids for years to come. Just remember that taking large withdrawals from your retirement accounts to pay off your mortgage could throw you into a higher tax bracket.

Helpful Article:

7. Review your savings progress.

typewriter - year-end retirement planning goals

Did you spend less money this year due to the fear of covid? Did you spend less money on eating out, vacations, or concerts? Did you buy less gas because you worked remotely?

If yes, stash those funds into retirement savings. If you are still working, try to boost your savings rate. It is never too late to increase the size of your nest egg. If you are in your early 50s, you still have close to 15 years of working to save for your retirement.

You should save at least 15 percent of your gross income in retirement accounts such as 401(k), IRA, Roth IRA, or Roth 401(k).

A key factor in any retirement plan is having enough savings to last for the next 20 to 30 years.

8. Check your readiness for unexpected expenses.

Another important key factor in any solid financial plan is having enough savings to fall back on during emergency. To be prepared, put it on your checklist to have two funds – a rainy-day fund and an emergency fund.

Typically, a rainy-day fund is smaller, up to $2,500 for smaller expenses. An emergency fund can be as much as 9 or 12 months of living expenses – $10,000 to $50,000 or more depending on your expenses.

Whichever way you build your financial cushion, be sure you do it. There is no better way to have peace of mind than knowing you have funds to cover expenses when you need them.

9. Review your asset allocation and simplify your portfolio.

As you are getting closer to retirement, it is important to have a clear and accurate picture of your complete investment portfolio.

If your portfolio is spread out among several investment companies, it will become difficult to keep track of all that information. Think about consolidating all your accounts in one place like Vanguard. So, you will get simplified reporting, low costs, and low fees.

The financial markets have fallen sharply this year. Take the opportunity to review your asset allocation and make sure your portfolio is diversified and invested for growth. You should have a mix of stocks, bonds, mutual funds, and other assets that fits your retirement goals.

It can be tempting to stay away from stocks to reduce the risk of losing money in your retirement funds. But stocks provide growth and investing for growth is important. If you retire at 65 and spend 20 years in retirement, you need to have enough growth in your portfolio to make money last that long.

Helpful Articles:

10. Keep will and trusts up to date.

Another important part of your year-end retirement checklist is the status of your will and/ or revocable living trust.

Keep them up to date and make sure you have suitable executors, trustees, and guardians in place. Additionally, you will want to make sure your list of beneficiaries is up to date as well. If you have welcomed a grandchild to the family do not forget to add his/her name to the list. Also, if there has been a change in the family such as a marriage, divorce, or death, make sure to update your beneficiary list.

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8 Ways to Get Your Finances Under Control

by Maggie Leave a Comment

hands holding us dollars-get finances under control

Life can be difficult, and our finances do not always work out the way we want. The cost of living is rising due to the current high inflation. As a result, your expenses are getting maybe too high compared to what you are making monthly.

Living paycheck to paycheck can be a challenge in today’s world. That is why I am bringing you 8 ways to get your finances under control so you can do a better job managing your money.

1. Start by understanding your current financial situation.

The first step for taking your finances under control is to understand your current financial situation.

Gather all your bills together. Log into your bank accounts and mortgage company. Look at your credit card and car payment statements to figure out how much you owe.

Once, you have gathered all your financial information, sit down, and take a look at it. Get a sense of your financial baseline:

How much is your debt – credit cards, student loans, personal loans
How much is your mortgage balance
What assets do you have – real estate, pensions, stocks, bonds, bank account savings, retirement accounts, cars, boats, etc.

Then, bring all your information to one place by writing it down on a piece of paper, or in the spreadsheet document.

2. Make a budget.

Many people avoid dealing with budgeting, but the easiest way to get control of your finances is to make a detailed and realistic budget that you can stick to.

Do not set up unrealistic goals about how much you are going to save or how much extra money you are going to earn. Use your budget to follow your actual finances.

You can budget manually using a spreadsheet on a piece of paper, a mobile app, or PC software like Microsoft Excel or Google Sheets. Another great way to use budgeting tools is to download and print different types of digital products.

If you have not created any budget before, start by using Microsoft Excel or Google Sheets and put together a spreadsheet document. Write out your monthly expenses on the left side of the spreadsheet.

These could include fixed expenses:

Mortgage/ Rent
Utilities
Car payment/ Car insurance
Phone/ Internet

and variable expenses:

Groceries/ Food
Clothes/ Personal care
Dining out/ Entertainment
Activities/ Gym
Travel/ Vacation

After that, divide your spreadsheet document and on the right-side type in the amount you are planning to spend each month and the actual spending on each category. At the bottom add up the total to make sure that you are not spending more than your income.

Spreadsheet software like Microsoft Excel or Google Sheets is designed for budgeting expense tracking. When you enter amounts in each category, the program automatically performs calculations and adds to the total. It’s easy to use and you do not have to have math skills.

Once you have created your budget, make sure you stick to it. Your budget is your financial road map. It shows the real picture of what you can live on and what you can afford to spend each month. If you are constantly going over budget, you need to cut your spending.

You should try to live on the popular 50/30/20 budget rule. The goal is to spend around 50 percent of your after-tax dollars on necessities, no more than 30 percent on what you want, and a minimum of 20 percent on savings and debt payments.

The important thing to remember is that budgeting helps to build wealth over time by freeing up extra money for savings.

To help you get started, here are a few useful articles you may want to read:

3. Track your spending and know where your money goes.

I still think that “going on a budget” feels like “going on a diet” because you have to cut back on many things. That is why many people resist the idea. However, you can feel more in control of your finances know where your money is going and become a smarter spender.

The best way to track everyday spending is really simple. You just need to keep all your receipts for the day, then add up each type of spending by category. Add in the total for that specific day using your spreadsheet document or mobile app.

laptop, notepad - get finances under control

Ask everyone in your family who spends money track their spending for a few months. At the end of each month, look at your spreadsheet and see where your money is going. If your spending is going off the rails, you need to cut back your expenses.

4. Cut expenses and live within your means.

We all love to use credit cards for convenience but sometimes they make it too easy to spend more than we have.

If you leave your credit cards at home and go shopping only with cash in your wallet you will spend less money. If you try shopping with cash for a while, you will be aware of how much you spend regularly. People who do this typically spend 20 percent less.

One of the best ways to cut your expenses is to save on luxuries like dining, entertainment, and international travel.

Today we live in the world of high inflation and rising prices on food, housing, and energy. Many families may need to reduce their expenses in other areas to make ends meet.

If your budget is still out of balance, it might mean more sacrifices. To keep your budget on track, you may want to cut back on frequent expenses:

Delivery memberships
Streaming services like Netflix, Spotify, and HBO max
Your cable bills
Gym membership and exercise classes
Data storage subscriptions like iCloud and Google Drive
Unneeded insurance
Costly gifts and seasonal expenses
Pricey cellphone plan
Takeout meals
Full-priced items
Playing lottery

However, do not try to remove all luxuries or things that make you happy.

Being too strict with yourself can cause depression which leads to budget frustration. If your budget leaves no wiggle room, it is impossible to follow it for a long period of time. Do not set up yourself for an overly restrictive or unrealistic plan.

5. Build an emergency fund to keep finances under control.

Everyone needs an emergency fund. Your emergency fund should give you peace of mind because it helps you cover large or unexpected expenses.

Once you have your spending under control you can start building your rainy-day fund.

Many experts recommend aiming for an emergency fund with 3 to 6 months of living expenses. Sometimes you need to increase the fund up to 12 months of living expenses. Even though your emergency fund cannot cover everything, it can still reduce the money you have to borrow from your family or use credit cards and increase your debt.

You should never tap your emergency savings for expenses like leisure travels, holidays, or wedding gifts. These expenses are non-emergency expenses.

A true emergency is a situation that demands immediate action:

Major car repairs
Health emergency co-pay or large deductible
Unexpected home repairs
Emergency travel

As I said before, having enough money to fall back on means that you do not need to rely on family or credit card debt to cover emergency expenses.

Most people hold their emergency funds in bank savings accounts for easy access.

To start your emergency fund, you can use automatic savings plan to stash some money. If you do not already have a savings account, open one at the same bank where you have your checking account. Then link your savings and checking accounts, so you can transfer money between the two.

The checking account is for your everyday spending to cover the bills and any extras.

The savings account is where your savings will grow over time. Set up automatic withdrawals to pull the amount you need each week from your checking account into your savings.

However, if you want to use online banks like Capital One 360 or Ally Bank you can get a better interest rate than your local retail bank.

Also, you can open high-yield savings account that you cannot dip into it often.

Best High-Yield Savings Accounts

6. Reduce or pay off your debt.

If you look at your budget and do not know how to make headway, it’s time to be honest with yourself.

The hard truth you have to face is that you cannot take your money under control because you are probably in debt. That means that you are spending more than you are earning.

Why is it so important to reduce debt?

Debt is always a slippery slope -the interest will eat massive chunks of your spending money, making budgeting difficult. When possible, avoid debt by paying it off fast and not creating new debt.

When you carry high-interest credit card debt it affects your credit score and your financial progress. Once your debt is paid, you can focus fully on saving, investing, retirement planning, and other financial goals.

There are two strategic and popular methods to get out of debt faster:

The Avalanche method helps to reduce the debt that carries the highest interest rate.
The Snowball method helps to get rid of debt with the lowest balance first, and then move on to the next lowest one.

The way the snowball approach works is you arrange all of your debts from largest to small ones. Pay off your smallest debt first. Then once the smallest debt is paid off, the money you were paying toward it will be applied to your next smallest debt.

With the avalanche approach, you will start paying off the debt with the highest interest rate and then move to the next highest.

Debt is always a big weight on your budget. The faster you can get rid of it, the faster you can get ahead.

Here are other strategies to help you reduce or pay off debt faster:

Refinance a home loan, student loan, or a personal loan
Negotiate for a lower interest rate on credit card debt
Transfer credit card debt to a 0% balance-transfer credit card
Negotiate for a lower interest rate on a home equity line of credit (HELOC)
Make bi-weekly mortgage payments

The process of paying down your debts can be satisfying. It will work as a big boost to see progress on your payments.

7. Invest your money and save for retirement.

We all know that it is important to save money in your bank account for emergencies. Having enough money to cover unexpected issues is critical. However, we do not want to keep all our extra money in bank accounts because interest rates are not high enough even to keep up with inflation.

Investing allows us to set aside money that grows steadily and can increase over time. While we might not see great gains in the short term, this is a great way to prepare and save for retirement.

If you have a workplace retirement plan like a 401(k), use that for your retirement savings with automatic withholding. If you do not have a workplace account, consider alternatives like IRA, Solo 401(k), and after-tax money accounts like Roth IRA.

8. Stick to your financial goals.

When you are trying to get your finances under control you need to stick to your goals and give them time.

Keep a close eye on the progress you are making. Keep in mind that paying off debt, tracking spending, or reducing expenses is not going to happen overnight. Take small steps toward the final outcome.

Each person’s financial goals are different. Start your process by identifying your top priorities. Then figure out how much money you need for each goal and how much time you need for reaching it.

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The 2020 Year-End Review and New Year Goals

by Maggie Leave a Comment

Another year flew by, and I am glad it is almost behind us. 2020 was a difficult year for most of us and the whole world.

As the new year approaches, I like to look back at all things that happened in the last year. I get to see what I did, and what I did not do. I like to take count of the goals I accomplished. And If I failed to follow through on all my goals, I know I have another chance to make them happen in the new year.

I am not a big fan of New Year’s Resolutions, but since starting the blog, I like to reflect on my previous year and see what I would like to accomplish next.

So, I am happy to present my 2020 year-end in review.

My 2020 Year in Review:

Financial goals review:

1. Credit cards and banking

I want us to be debt-free as we are getting closer to retirement. In the past few years, Roman and I have accumulated $5,400 in medical debt. We transferred this money to 2 credit cards with 0 percent interest and finished paying off our debt in September. With this strategy, we would not dip into our savings.

We funnel all our regular purchases onto a couple of different rewards credit cards to earn points on our everyday spending.

Our go-to card is a PayPal credit card with 2 percent cash back on everything. Our secondary card is the American Express Blue credit card which we use at supermarkets with 3 percent cash back.

However, we also opened the Citi Dividend Platinum to take advantage of the 3-month promotion that gave 5 percent cash back at supermarkets.

Finally, we use the Bank of America credit card to pay for gas with 3 percent cash back. All these credit cards require no membership fee.

We have a combined no-fee checking account at Winchester Savings Bank which we use for bill payments, our mortgage, and money transfers.

We have 3 savings accounts. One savings account is a combined account at Winchester Savings Bank. The interest rate is very low, so we do not stash our savings there.

Capital One 360 is our primary savings account, which has no monthly fees and offers decent returns. We use the American Express High Yield Savings account for our emergency and travel funds.

2. Retirement accounts

I have several retirement accounts – 401(k), Roth 401(k), IRA, and Roth IRA. Each month I contribute roughly 12 percent of my salary to 401(k) and Roth 401(k), and my employer matches 3 percent. My strategy is to increase the contributions by 1 percent each year.

Unfortunately, that did not happen in 2020 because it was a difficult year and I was concerned about keeping my job, as we all saw so many people around us losing their employment. Luckily, my company managed through this year and worked hard to keep everyone employed. They even distributed bonuses to reward people for their efforts throughout the difficult year.

When COVID-19 entered our lives and the stock market fell drastically, I had a few sleepless nights as all our retirement and investment portfolios plummeted. We lost roughly 10 percent of our investments.

Luckily, it was a short-lived market downturn, and in April we already saw positive signs of market recovery. We are actually now in a better spot than before. Even though we lost a lot of money at the beginning of 2020, we gained it back through the year. Overall, our retirement and investment portfolios 2020 return was 9 percent.

I was planning to add $3,500 to my Roth IRA account in April, but again it did not happen because of the ‘gloom and doom’ news around us.

Related Posts:

3. Emergency fund and other savings

We were able to increase our savings despite all the chaos and uncertainty we experienced in the first half of 2020. It was easy to cut unnecessary expenses and find more ways to save money with both of us working from home since the middle of March.

Working from home helped us to save a lot of money on gas, parking, lunches, business clothes, dining out, etc. I am happy to report that we managed to meet our goal and increased our emergency fund up to $30,000. From now on, we want to use this money only for emergencies.

In 2019, we opened a separate savings account and called it “travel”. Roman and I like to travel and often pay for our travels with emergency fund money. I wanted that practice to stop and find other ways to pay for our travels.

In 2020, we made some adjustments to our budget and were able to save $3,000 in our “travel” fund.

4. Home mortgage

We bought our house in 2002 and did various big and small renovation projects that increased the value of our house. Right now, we are trying to stay away from any additional upgrades or renovations and just focus on paying off the mortgage.

In 2020, we brought our mortgage balance down from $241,000 to $230,000.

Blogging goals review:

2020 was a year when I challenged myself and pushed harder to improve my blogging skills.

I did not know about all the additional work that would be required when I launched the Save, Invest & Retire Blog in 2019. The blogosphere changed so dramatically over the years. According to the stats, there are 500 million blogs in the world today. That is a lot of competition to deal with for a new blogger.

In 2020, I became more knowledgeable about the blogging world and set up new goals for blog content, email marketing, traffic building, and a social media strategy to grow Save, Invest & Retire.

Not everything worked out the way I wanted it but setting up the goals and working towards them helped me to stay motivated.

Travel goals review:

2020 started well enough with plans to travel to Greece in May and Lithuania in September. But then… well everyone’s life changed.

We had to cancel both of our trips. We were lucky to get refunds on both of our trips, including Lufthansa airline tickets, hotels, and a full refund on the canceled Greek Islands cruise.

Related Post: My 2019 in Review

Final Thoughts on My Year-End Goals

Reviewing my 2020 goals was a painful exercise. I did achieve a good portion of my goals but not all of them. I think it is important to remind ourselves that missing a few goals is perfectly human and there is always the opportunity to try harder in the following year.

I will continue to try my best and improve on my successes from 2020 in 2021.

My New Year 2021 Goals:

top of mountains - new year financial goals

While 2020 was full of unexpected challenges, I am grateful I can still focus on my 2021 goals. First time I published my goals on this blog was in 2019.

I believe that sharing my goals on the blog is a great way to hold myself accountable. It helps me stay the course when life unavoidably gets in the way.

Financial goals:

1. Contribute to retirement accounts

In 2021, we will continue investing in our retirement savings.

I will continue contributing to my traditional 401(k) and after-tax Roth 401(k) so I will have another $15,000 stashed in my retirement accounts. Right now, I am saving 23 percent of my salary for retirement.

The ultimate goal is to max it out to $26,000. Unfortunately, this may be a difficult goal to reach in the upcoming year, but I will keep it as a goal to keep myself motivated.

The 2021 combined contribution limit for traditional IRA and after-tax Roth IRA is $7,000 for individuals age 50 and older. We plan to contribute $3,500 each to our Roth IRA accounts.

2. Increase savings

We have increased our savings significantly in 2020. We paid off our daughter’s student loan (2018), a car loan (2017), last construction loan (2015), and medical debt (2020).

Currently, we have no desire to buy a new vehicle, renovate our home, or make any large purchases that would require us to take on any new debt. No new debt means we will be able to save more money in 2021.

3. Pay off debt

Unfortunately, we had to take on a new loan to replace our broken boiler. The cost of replacing an old boiler, new water heater, and required new chimney lining was $13,800. We were able to secure a 0 percent interest rate 7 years loan with the Mass Save program.

The goal is to pay off the loan in 4.5 years.

4. Continue to pay off our home mortgage

We are slowly paying off our 3.5 percent interest mortgage. Last year we were able to reduce the balance to $230,000. As we are getting closer to retirement, I want to have our home free and clear of any debt.

In 2021 we are planning to refinance our mortgage to a lower interest rate, so we can speed up the process of reducing our debt.

Blogging goals:

Content

Continue with retirement planning content for new posts.
Add a new page with content on health and wellness.
Collaborate with other bloggers for guest posts.
Keep creating and publishing new posts every 2 weeks. I need to get at least 3 new posts ahead on Save, Invest & Retire, so I will have enough time to edit and add graphics before publishing them.
Start a content calendar.

E-mail marketing

Create a landing page to promote the resource library.
Update an old opt-in and make it work with the Mailchimp platform better to collect new subscribers.

Digital product

Create a new resource library with at least 5 printables for retirement planning and retirement budget.
Start working on an e-book.

Social Media

Stay active on Pinterest and Facebook.
Use Pinterest to drive traffic to my blog.
Learn how to automate social media.

Travel goals:

Like everyone, we had a few trips planned for 2020 but had to postpone our international travels hoping it will be safer to travel in 2021.

Currently, we do not have any concrete travel plans. We hope for normal life to resume with the approval of the COVID-19 vaccines. While clinical trials show the vaccines are effective at preventing illness, it is not clear if they prevent the spread of the virus.

Final Thoughts

2021 will be another year when Roman and I will be trying to achieve all the goals we set up for ourselves. We will focus on accelerating our financial goals so it will bring us closer to the day we can retire.

What goals or changes you will be making in 2021? Share your thoughts in comments.