Thinking about retirement?

Retirement is heading your way–time to ramp up your plan with these tips.

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Tips and to-dos from money guru Jean Chatzky

Retirement is heading your way—and you get that. You’re making progress when it comes to saving and investing, starting to strategize about what this phase of your life might actually look like. The question is: Could you be doing more? And the answer is: Yes. Here’s how.

Acknowledge competing goals:

Perhaps you want to buy a house—or put a child or three through college. You still have to start socking it away for your future. That's because you can't borrow for your retirement like you can for college. Two good rules of thumb to follow: Save 5% of whatever you're earning for your short-term goals (starting with your emergency cushion) and invest 15% (including matching dollars) for the long term. And if you're not meeting those thresholds today, don't panic. Consider bumping up your contributions by 2% a year until you get there.

Automate your savings—across the board:

The easiest way to save for any goal is automatically—and to put the money into an account that you're not likely to touch. For retirement, a 401(k), 403(b), or 457(b) plan fits the bill. If you don't have an employer-sponsored plan, craft your own with regular, automatic contributions from your checking account into an IRA, Roth, SEP-IRA, or other tax-advantaged retirement account. And then do the same for your other goals—college, health care (more on this in a moment), and any others on your list.

Pay attention to your investment strategy:

Review your investments once a year to make sure your asset mix (mix of stocks, bonds, and short-term investments) still lines up with your goals—the movements of the markets can throw your mix out of whack. If you'd rather not deal with this, consider a single-fund solution. There are typically two types of these funds: target date funds (based on an anticipated retirement date) and target allocation funds (based on a risk tolerance and time horizon). You can also look into whether your retirement plan has a managed account offering.

If you have one, consider maximizing the use of your HSA, too:

Used artfully, a health savings account (HSA) is not just a way to pay for your non-reimbursed medical care during your working life, it's a supplemental retirement account. Contributions can be made with pretax dollars, the money grows tax free, and when you use it to pay for qualified health care expenses in retirement (including Medicare premiums), you don't pay income taxes on the withdrawals. If you don't need the money for health care in retirement, you can use it for other living expenses and it will be taxed as if it's coming out of your 401(k). Plus, as with 401(k)s and 403(b)s, you may get "free" money from your employer just for participating.

Chip away at your mortgage:

If your retirement savings accounts are on track and your high-interest debt is paid off, a paid-down mortgage is another supplemental retirement account, whether you live in the home rent free or downsize and use the proceeds to beef up your nest egg. Resist the urge to use your home as an ATM through the years.

Benchmark your progress:

Fidelity's savings factors can help you track where you are on your journey to retirement. By age 30, save 1x your current salary. By 40, 3x. By 50, 6x. By 60, 8x. And by 67, 10x.* Not there? Again, don't panic. One option is to consider increasing your retirement contributions by 2% each year to make up the difference.

Schedule a checkup with an advisor or an investment professional:

At any point along your journey toward retirement, if you want to make sure you're making the most of your opportunities to invest more (particularly in a tax-advantaged way), consider sitting down with a financial advisor. Having a person on your team who can look at your financial situation from a holistic perspective can be valuable at many times of life—but particularly at inflection points, when you're trying to steer yourself from one stage of life to the next.

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Investing involves risk, including risk of loss.
This information is intended to be educational and is not tailored to the investment needs of any specific investor.
*The 10x savings rules of thumb are developed assuming age-based asset allocations consistent with the equity glide path of a typical target date retirement fund, a 15% savings rate, a 1.5% constant real wage growth, a retirement age of 67 and a planning age through 92. The replacement annual income target is defined as 45% of pre-retirement annual income and assumes no pension income. This target is based on Consumer Expenditure Survey 2011 (BLS), Statistics of Income 2011 Tax Stat, IRS 2014 tax brackets and Social Security Benefit Calculators. Fidelity developed the salary multipliers through multiple market simulations based on historical market data, assuming poor market conditions to support a 90% confidence level of success. These simulations take into account the volatility that a typical target date asset allocation might experience under different market conditions. Volatility of the stocks, bonds and short-term asset classes is based on the historical annual data from 1926 through the most recent year-end data available from Ibbotson Associates, Inc. Stocks (domestic and foreign) are represented by Ibbotson Associates SBBI S&P 500® Total Return Index, bonds are represented by Ibbotson Associates SBBI U.S. Intermediate Term Government Bonds Total Return Index, and short term are represented by Ibbotson Associates SBBI 30-day U.S. Treasury Bills Total Return Index, respectively. It is not possible to invest directly in an index. All indices include reinvestment of dividends and interest income. All calculations are purely hypothetical and a suggested salary multiplier is not a guarantee of future results; it does not reflect the return of any particular investment or take into consideration the composition of a participant's particular account. The salary multiplier is intended only to be one source of information that may help you assess your retirement income needs. Remember, past performance is no guarantee of future results. Performance returns for actual investments will generally be reduced by fees or expenses not reflected in these hypothetical calculations. Returns also will generally be reduced by taxes.
Jean Chatzky is not employed by Fidelity but may receive compensation from Fidelity for her services.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.
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