The retirement “red zone”—the last 5-10 years before you retire—is important for helping secure your financial stability.  According to Vanguard’s “How America Saves 2024” report, average account balances increased by 19% in 2023, driven primarily by favorable market returns. This highlights the importance of continued contributions and strategic asset allocation, especially as one approaches retirement, to capitalize on potential market growth during those critical final saving years. Let’s explore key steps to make these last years count and help maximize your retirement readiness.

1. Optimize Retirement Contributions

If you’re age 50 or older, consider taking advantage of catch-up contributions to your 401(k) or IRA. For 2023, you can contribute an additional $7,500 to a 401(k), boosting retirement savings potential significantly (IRS, 2023).

2. Adjust Investment Risk

As you approach retirement, reducing risk in your portfolio can help protect against market downturns. The 2020 stock market crash wiped out trillions of dollars in retirement savings, underscoring the importance of conservative investments in the years leading up to retirement (S&P Global Market Intelligence, 2020).

3. Plan for Health Care Costs

With average out-of-pocket medical expenses for retirees estimated at $315,000 for a couple over 65, accounting for health care is essential (Fidelity Investments, 2023).

By focusing on these strategies, you’ll be in a stronger position to enjoy a confident and fulfilling retirement.

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Sources:

• Vanguard. (2024). How America saves 2024: Insights into retirement savings behavior. Retrieved from https://investor.vanguard.com/investor-resources-education/retirement/savingsIRS. (2023). Retirement Topics – Catch-Up Contributions. Retrieved from https://www.irs.gov
• S&P Global Market Intelligence. (2020). Market Decline During the COVID-19 Pandemic. Retrieved from https://www.spglobal.com
• Fidelity Investments. (2023). Health Care Cost Estimate for Retirees. Retrieved from https://www.fidelity.com

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