Retirement Planning – A Quick Start

It’s vital to start maximizing your 2021 retirement contributions. If you turn fifty this year, start your catch-up additions as soon as possible. You do not need to wait until your 50th birthday. For example, if your birthday is on December 31, 2021, you can increase your contributions on January 4, 2021.

Here are the limits and thresholds for this year.

  1. You can contribute $19,500 to your 401(k) or 403(b) plan, and if you’re fifty or older, you can add another $6,500 for a total of $26,000.
  2. Maximize your SEP-IRA contributions. Do you own your own business? If so, you can add $58,000 or 25% of your income (whichever is less) to a SEP-IRA
  3. Contribute to a Roth 401(k) or 403(b). Regardless of your income, you can contribute to a Roth 401(k). Your savings and earnings will grow tax-free.
  4. Rebalance your company retirement plan. If your company offers automatic rebalancing, set it to annual. January is a good time to rebalance your account and review your asset allocation.
  5. Increase your annual contribution by 1% or 2% this year.
  6. Fund your IRA’s. The maximum contribution is $6,000, or $7,000 if you’re fifty or older. You’re allowed to contribute to an IRA regardless of income.

A quick start is paramount to a successful retirement plan. After all, the sooner you start, the faster you can retire.

January 3, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.