3 Retirement Moves to Make in May Now That Tax Season Is Behind You
Key Points
Taxes are a headache, and sometimes a bit of a heartache, but they are in the past.
Now, it is time to look forward, with the work you just completed helping guide you.
- The $23,760 Social Security bonus most retirees completely overlook ›
I don't know anyone, other than my tax accountant, who enjoys tax season. And even they are happy when it's finally over. Completing your taxes is a relief, but it can also be a major trigger event. Here are three big retirement moves to consider now that you are done with your taxes.
1. Review your financial picture
The information you collected for your taxes is, basically, the same information you need to assess where you are on your retirement journey. The first thing to consider is your balance sheet. Simply line up your assets (including an estimate of your home equity, if you own a home) and your liabilities (including your mortgage, if you own a home). Subtract your liabilities from your assets to figure out your net worth. That's the snapshot of where you stand financially.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
A mortgage might leave you with a negative net worth, but don't get overly hung up on that. You are slowly building your equity. However, if your net worth is negative and not due to your mortgage, you may want to focus on reducing your debt load. If you are paying high rates on your debt, which would likely be the case if you are carrying substantial credit card debt, the money you save by paying it off will likely leave you with a higher return than you would get if you saved the money and invested it.
Also, consider your current life situation. It may be different from the last time you thought about our finances. Marriage, a child, or a new home could all change how you need to think about your emergency cash. Do you still have three to six months of living expenses easily available to you? If not, think about topping that up.
Lastly, focus on the money you've put aside for retirement. How big is the nest egg? Maybe you have a dollar goal to compare that figure to. If not, you can do some searches online to find comparison points that make sense to you, like people of a similar age or people in a similar income bracket. Get a feel for whether you need to step it up a notch or if you have enough to actually spend a little more on enjoying your life.
2. Think about capital gains and losses
You should also drill down into your portfolio a little bit. You may find that investments you made have grown so much that they are now overweighted in your portfolio. For example, Bloom Energy (NYSE: BE) is up a shocking 1,600% over the past year.Taking some profits could make sense, with the goal of spreading the cash into other investments you own or into new ones to improve your diversification.
At the same time, you may want to look at investments that haven't worked out as well as you hoped. Is it time to sell them and invest in better ideas? Can you harvest losses here to offset gains from winning positions that need to be trimmed?
From a big-picture perspective, just like your emergency savings, think about how well your portfolio suits your current needs. If you find there are some investments that don't align with your current risk profile, think about making some changes to your portfolio.
3. Prepare for your current year retirement contributions
The last big move is to get a head start on your 2026 retirement savings goals. You don't have to wait until tax time next year to make your IRA or Roth IRA contributions. If you have the cash, perhaps thanks to a tax refund, put that money to work right away. The earlier you save, the more time your money has to compound. A few months may not sound like a big deal, but every little bit helps.
On a similar note, revisit your 401(k) contribution rate, if you have a 401(k). Consider increasing the rate by just one single percentage point (more if you can). That shouldn't hurt too much. If you add a percentage point each year, you'll quickly get to a point where you are maxing out your 401(k). And that will put you in a great position for retirement.
Make retirement planning a part of doing your taxes
The key takeaway here is that you don't want to view taxes as a one-off event. View them as a part of the larger process of assessing your financial position and preparing for the future. If you do that, doing your taxes can help ensure your long-term retirement success. Small things like taking stock of your financial situation, reevaluating your portfolio, and prioritizing retirement savings can lead to big returns over the long term.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bloom Energy. The Motley Fool has a disclosure policy.
Recommended Articles
