Summer is an important season to pay attention to your health. You need to watch your sun exposure, make sure all that extra sunlight isn’t disrupting your sleep and keep the weight you might gain from those ice cream sundaes under control.
It’s also the perfect time to take a look at your financial health. Here are five areas you can analyze to make sure you’re in good financial shape moving forward:
- Do you have a budget and are you sticking to it? Are you adjusting your budget for inflation? It isn’t enough to spend less than you make, you also need to account for rising costs of essentials like food, fuel, clothing and housing.
- Are you saving enough for an emergency? Ideally, you should have saved three to six months of living expenses to tide you over in case of an unforeseen emergency like job loss, illness, natural disaster, fire, major appliance replacement or vehicle repair.
- Are you paying off your debt in the most effective way? The first step is to analyze your debt situation and review the applicable interest rates. Then, set up a payment plan and stick to it.
- Do you have an income gap and, if so, how will you address it? A retirement income gap occurs when your income stream from Social Security, pensions, and/or rental property is not enough to cover your retirement budget. Before you retire, you need to know how you will cover this gap. Will you withdraw from an IRA? If so, how much can you afford to withdraw without losing principle? Do you have an annuity? If so, what will your start date be to turn on your payment stream?
- How will taxes impact your retirement budget? It is important to know the difference between qualified accounts, like traditional IRAs and 401(k)s, and non-qualified accounts, like your checking or savings accounts. You will need to pay taxes on withdrawals from a traditional IRA. You will not need to pay taxes on withdrawals from a Roth IRA. The actual value of those accounts depends on what you will need to pay when you withdraw them and it’s important to take a look at that before you retire.
If you have any questions regarding your financial health and whether you’re on the right track for retirement, call us today to set up an appointment. We would be glad to help!