Broker Check

Monday Money Report

| April 29, 2024

The markets bounced back last week, with the biggest weekly gain since November.[1] Reported earnings from large tech companies helped investors shrug off the sticky inflation numbers reported last week.


If the growth in your investments over the last year has made you think about retirement, there are things you’ll want to do in the next few years before you turn in your notice. First, use your peak earnings years to maximize your retirement plan contributions. Assuming you’re over 50, you can contribute $30,5000 to a 401(k), 403(b), or TSP. If you have a Health Savings Account, you can also contribute an additional $1,000, for a total of $9,300 for a married couple. Maximizing those contributions can help cover medical, dental, and vision expenses in retirement.


Next, consider your Social Security options. Every year you delay taking benefits, your monthly payment grows by about 8%. Depending on your health, savings, and retirement income, you may want to claim benefits as soon as you retire, or wait until you are 70. Your financial advisor should be able to help with this decision.


If you’ll be retiring before 65, you’ll need to think about health insurance, unless you will receive retiree medical benefits. We generally budget $13-14,000 a year in insurance costs for early retirees.  If you’ll be 65 or older at retirement, make certain you enroll in Medicare before you retire. If you miss the window for enrollment, you’ll pay a penalty in the form of a permanent increase in premiums.


This is also the time you’ll want to pay off your credit cards, and do any necessary repairs or renovations to your home. If you’re thinking of downsizing or moving in retirement, begin the decluttering process now.


Five years out from retirement is also a good time to evaluate your asset allocation, or how your money is invested. While you probably don’t want to pull completely out of the market – chances are you have 20 to 30 more years ahead of you – you also may want to reduce risk in your portfolio. By risk, I mean the range of possible returns. It’s unlikely you would lose everything, as hundreds of companies would have to go completely out of business for that to happen.  But a 20-30% drop in the value of the stock market is probable over the next ten years. Putting some guardrails on your investments while the market is doing well can be a wise decision.


Finally use the next few years before retirement to plan the other side.  Not your money, but your life. What are you going to do all day for the next 25 years? Who are you going to spend time with? How will you find a sense of purpose? And finally, are you healthy enough to enjoy the next 25 years? Take the five or ten years before retirement to get in shape – financially, socially, and physically.

Your action item is to schedule those medical exams you’ve been putting off.  The dentist, the mammogram, the colonoscopy. An ounce of prevention is worth a pound of cure.

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CovingtonAlsina is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

[1] Market Watch, Big Tech drives S&P500 to best week since November, by Christine Idzelis, 04/27/24