Countdown to Retirement

The last of the kids graduates this May – and you’re looking forward to having a little extra cash. What should you do with it? The same thing you should have done when you paid off your car loan – direct those extra dollars to your retirement savings accounts.

If you’ve been saving for retirement for the last 20, 30 or 40 years, you’re almost at the finish line. But there are some strategies to make your last few years, likely at your peak salary and with a favorable cash flow, particularly productive. When retirement is just around the corner:

Max Out your 401(k). In 2013 the limits are generally the lesser of your income, or $17,500. However, that figure rises to $23,000 if you are age 50 or over.

Consider the HSA. If you are eligible, you might want to choose your company’s high-deductible health insurance option, and then make corresponding tax-deductible contributions to a Health Savings Account (HSA). The HSA contribution limits for 2013 are $3,250 for individuals and $6,450 for families. Plus, if you’re over 55 or older, you can sock away another $1,000. Remember, any unspent money in your HSA accumulates and can be withdrawn tax-free to pay for future qualifying medical expenses. Better yet, after age 65, you have the additional flexibility to make taxable withdrawals to use for any purpose, as if it was an IRA.

Consider refinancing your mortgage. You may be able to lower total monthly expenses and raise liquidity by re-financing your mortgage. Sock anything you save in safer savings vehicles, earmarked for future big expenses that would otherwise cause you to borrow – a new car or a major home improvement.

Get in sync with your spouse. According to the Urban Institute, among two-income couples, nearly one in five retires in the same year, and another 30% within two years of each other. Keep in mind that quitting the 9 to 5 work schedule in tandem isn’t always the best move, both from a cash flow and adjustment perspective.

Map your move. If you plan on moving, take some trips to evaluate potential new hometowns. Consider medical care, proximity to family, access to cultural and recreational events, weather, and cost of living. And, importantly, try living on your estimated retirement budget for several months.

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