Financial Self-Care Through the Years

Financial Self-Care Through the Years

Taking care of yourself can have different meanings as you grow older. As the circumstances of your life change, you may find yourself changing your eating and exercise habits, vacationing more, or taking other steps to ensure that you’re in good shape physically and mentally.

The same goes for financial self-care throughout your career. The steps you take to ensure a more secure financial future will likely change as your working years progress.

• Starting out: These are the years for building good habits. Saving for retirement is one good habit that may pay off down the line. Be sure to take advantage of any match your company may offer through its retirement plan. When choosing your investment funds from among those offered through your retirement plan, make sure you know your risk tolerance, time horizon, personal circumstances and complete financial situation before investing. Check out Mutual of America retirement readiness resources here.
• Mid-career: As you settle into your career and your salary increases, think about making larger contributions to your retirement plan. If you’ve focused more on saving for goals like buying a home or college tuition for family members, this may be a good time to pivot toward saving more for the future.
• Home stretch: Once you’ve turned 50, you can make catch-up contributions to your retirement plan above and beyond the ordinary maximums. Currently, the extra amount allowed is $6,500 per year in most 401(k) and 403(b) plans. You also may want to revisit your investment choices to make sure they continue to meet your risk tolerance, time horizon, personal circumstances and complete financial situation.
• Transitioning to retirement: Retirement looks different for every person. Travel, volunteering in your community, or spending time with family might be your focus. Or you may decide to keep working—possibly even shifting into a new career. You’ll need a plan for making withdrawals from your employer-sponsored retirement plans and any IRAs.* Generally, you must begin taking annual distributions (known as Required Minimum Distributions or RMDs) from your traditional IRAs by April 1 of the calendar year following the year you turn 72. For retirement plans, RMDs must begin on April 1 of the calendar year following the calendar year you retired or reached age 72, whichever is later.

*Generally, withdrawals are subject to income tax at your ordinary income tax rate at the time of withdrawal, and if made prior to age 59½, a 10% federal tax penalty. The IRS taxes RMDs as ordinary income.