
Happy 2021! In the spirit of the New Year, I have put together a list of financial New Year’s resolutions for baby boomers.
These financial goals are especially important for people who are planning to retire within the next 10 years. I personally think that the beginning of the year is a great time to start something new and work towards a goal.
Here is the list of financial New Year’s resolutions for baby boomers:
1. Determine how much of the nest egg you will need.
When you are near retirement, it is important to know how much of the nest egg you will need to live comfortably for the rest of your life. How do you figure it out? You have options.
The typical advice is you should aim 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.
Also, you can use an online retirement calculator. Take a few minutes to enter initial information and then see the numbers, and where you stand today.
Vanguard – Retirement Nest Egg Calculator
Or you can use your current expenses and determine how it will change when you retire.
The best advice is to create an estimated retirement budget based on your current and future expenses. You might have a general idea of what you spend now. But you will be better prepared financially for retirement if you have a clear picture of your expenses now and how that might change in the future.
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2. Get a clear picture of your retirement income.
When you are working, you probably have a single employer and a single source of income – your salary. In retirement, everyone has different sources of income.
As a retiree, you receive income from multiple sources: Social Security, pension, part-time job, or rentals (if you have any).
Another source of income will come from your nest egg – investments and retirement savings:
- Tax-deferred accounts – 401(k), IRA
- Tax-free – Roth IRA, Roth 401(k)
- Taxable investment accounts
- Taxable bank checking and savings accounts
Getting a clear picture of your retirement income will help to make sure you have enough money to cover all your living expenses.
To make your assets last through the next 20 or 30 years, use the rule of thumb to withdraw 4 percent of your portfolio 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.
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3. Set a target retirement date.

Another important financial goal for baby boomers who are near retirement is to set a target retirement date. We all need to plan for the day when we are ready to retire or can no longer work.
Based on your target retirement date, retirement income, and what you want to spend in retirement, you can determine if you have enough money saved for your golden years. If it is not enough for a comfortable retirement, move the date, and save more into your retirement funds.
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4. Update your budget.
What is your budget? How much you want to save and how much to spend in 2021?
Sticking to your budget can help to know where your money is going. If you want to save more money for your upcoming retirement, begin eliminating some expenses that may not be important to you anymore.
When you retire, you do not need a lot of things that you did when you were working. The costs of commute, take-out lunches, and business clothes will go down. But you will start spending more money on travel, hobbies, and activities.
Balancing income with your spending plan will help you to save more money for retirement.
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5. Maximize your retirement savings.
Whenever possible, increase your retirement contributions up to the maximum allowed in retirement plans such as 401(k), IRA, and Roth IRA.
When you are a few years away from retirement, being short on retirement savings can be problematic. The best option is to start reducing expenses in your budget, so you can put more money into your retirement savings.
The 2021 contribution limits are:
- $19,500 for 401(k) retirement plans. And if you are age 50 or older, the catch-up contribution is an additional $6,500. So, you can save a total of $26,000.
- $6,000 combined contribution for traditional IRA and Roth IRA. And the catch-up contribution for people age 50 or older is $1,000. So, you can save up to $7,000 with your pre-tax money (IRA) and after-tax money (Roth IRA).
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6. Get out of debt before retirement.
Paying off debt, no matter how much you owe, is a key to a stress-free retirement. Getting into retirement with any kind of debt will put a burden on your lifestyle.
The best advice for baby boomers is to pay off all your debts before you retire including a mortgage.
When you are working, you have years of earned income to pay a mortgage, credit cards, student, or any other kind of loan. But once you retire, you will be living on a fixed income.
And when you start living on a fixed income, it is hard to pay off debt if you need to pull big chunks of money from your savings. Although, big withdrawals from retirement funds could push you into a higher tax bracket.
Being debt-free gives you more freedom and money left in your pocket to enjoy your golden years than struggling to pay the mortgage or other debts.
To pay off all debt including a mortgage might not be realistic for everyone. However, the less debt you have, the better you are prepared financially for retirement.
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7. Rebalance your portfolio.

The 2020 year has been a volatile year for financial markets. 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 at this stage of your life. If you retire at 65 and spend 20 years in retirement, you need to have enough growth to make your money last that long.
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.
You need to remember that a well-balanced portfolio will help you to weather market downturns. Also, it will potentially generate a retirement income to cover your living expenses.
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8. Think about the future medical cost.
Health care is expensive. Unfortunately, many baby boomers forget to include it in their financial plan. Medicare will cover most of your routine health-care costs if you retire at age 65 or older. Unfortunately, it does not pay for all medical bills, and it does not pay for long-term care at all.
Underestimating health care expenses or how to pay for long-term care can be a big financial mistake. Think about your future medical cost and find ways to protect your retirement savings.
Consider buying long-term care insurance which can help to pay for home health aides in your late years. If you buy long-term care insurance now, your premiums will be lower than if you wait several years.
It is recommended by many financial gurus to open a health savings account (HSA).
The money you can contribute to HSA is tax-deductible or pre-tax. And any increase in the value of your account is free from federal taxes. But it has to be used for qualified medical expenses otherwise you will be paying income tax and penalties on your contributions.
The 2021 HSA contribution limits are:
- $3,600 for individual coverage
- $7,200 for family coverage
You can put money into HSA every year until you enroll in Medicare benefits. After that, you are no longer allowed to contribute. However, money that you do not spend will be accumulating in this tax-free account until you need it in retirement.
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9. Plan where you will live.
Where you will live in retirement could have a big impact on your living expenses. Consider this option – sell your big house in an expensive location and move to a smaller house or condo in a low-tax state. In this case, your living expenses will be reduced, and you might have some extra income to pay for things you love to do in retirement.
You may also consider staying in your town but moving to a smaller home or condo. That will be more financially manageable while living on a fixed income.
But if you are planning to move to a big city you should be financially prepared to spend more money because retiring in a booming metropolis can be pricey.
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Final Thoughts
I know many people do not bother with New Year’s resolutions. But I find them to be very motivating. New Year’s financial resolutions are a great way to take steps to move towards your new goals.
What is your New Year’s resolution? Do you have any financial goals?
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