URGENT UPDATE: As the year comes to a close, retirees are urged to review their financial strategies immediately. With key deadlines approaching, including the December 7, 2023 deadline for Medicare open enrollment, now is the time to ensure your financial health is on track for 2025.
Financial experts emphasize the need for retirees to revisit their portfolio spending rate. This crucial assessment involves dividing your portfolio balance at the beginning of the year by your expected spending, including taxes. If your spending rate exceeds the 4% guideline, consider adjusting based on your retirement stage. A recent study indicates that a withdrawal rate of nearly 7% is safe for those with a 15-year spending horizon.
Additionally, Medicare open enrollment allows retirees to reassess their healthcare coverage, including prescription drug plans. This is a vital opportunity for retirees to ensure their medical needs are adequately met in the coming year.
Next, retirees should analyze their total portfolio’s asset allocation using tools provided by platforms like Morningstar. Identifying overperforming asset categories—such as US stocks—can help in reallocating funds effectively, especially when planning for required minimum distributions (RMDs). If you’re aged 73 or older, the December 31 deadline for RMDs is fast approaching, making it essential to lighten up on certain securities to meet these requirements.
Retirees should also assess their cash reserves. Keeping a buffer equivalent to six months to two years of portfolio withdrawals safeguards against market downturns. If you are at RMD age, consider using your distributions to replenish this cash reserve.
For those planning to make charitable contributions, it’s important to note that individuals over age 70½ can utilize qualified charitable distributions (QCDs) to donate up to $108,000 without incurring a tax bill. This strategy can satisfy RMDs while supporting your favorite causes.
Tax-loss selling is another critical item on the checklist. Although stock performance has been strong this year, retirees should evaluate potential losses that can offset capital gains or ordinary income. This strategy may be less advantageous compared to previous years, but it remains an important consideration.
In summary, retirees need to act swiftly as these year-end financial strategies can significantly impact their financial well-being. As deadlines loom, now is the time to assess your portfolio, healthcare coverage, and charitable giving strategies to ensure a secure financial future.
Stay tuned for more updates as we continue to monitor the financial landscape for retirees.