Daily Money - Mind These Year-End Deadlines

Nothing like a pandemic to distort your perception of time. Since it seems like January was at least five years ago, it shouldn’t feel like the holiday season snuck up on us. And yet, it does. I’ve probably reached the age where the holidays' arrival will always feel sudden. (“How is it Thanksgiving? It was just July 4th!”)  So here we are, checking our shopping lists and minding year-end deadlines. Dec. 31 is the deadline to make the special $300 charitable contributions that the CARES Act allows. And it’s also the last day to take penalty-free 401(k) withdrawals. Learn more about that option — and why it should be a last resort  — in today’s edition.

This week in our Retire with Money Facebook group, a teacher asked the group, “Should I try to replace 100% of my salary (with Social Security, pensión and investments)? I don’t see my expenses changing much. If anything I will spend more money traveling.” One member replied, “Conventional financial literature usually recommends 80% of income replacement. However, I think 100% would certainly allow you to do what you want to do based on your comments.” I agree it’s better to err on the conserative side, if possible. What tends to happen is, as people move into old age, travel and other hobbies may slow down, but medical costs escalate. Check out Money’s story on a simple trick for estimating your retirement income needs.

Planning for retirement can be tricky; after all, there's no way of knowing for sure how much money you may need. You can start by estimating how much you may spend each year in retirement. You probably won't spend as much each year in retirement as you do during your working years, so you'll only need to replace part of your income in order to maintain your lifestyle in retirement. As a general rule of thumb, you can estimate that your savings (including a pension, if you have one) should provide a yearly income equal to about half of your pretax, preretirement income. Your Social Security benefits may cover the rest of your annual retirement expenses, but it depends on your spending and lifestyle. The age at which you claim Social Security benefits can have a significant impact on your monthly income too. Click below to see if you are saving enough for retirement.

The annual open enrollment period ends Dec. 7. REUTERS

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