Spotlight on Retirement Planning Trends for 2021

The complexities involved in planning for retirement change every year depending on inflation, account contribution levels, living standards, and unforeseen expenses, among other factors. However, continuing to grow funds in your retirement account might be a little more difficult than usual in 2021 as a result of the economic effects brought about by the COVID-19 pandemic. Some may have to consider early retirement with significantly less money than anticipated, while others might be forced to suspend contributions to their 401(k) or Roth IRA for the foreseeable future. The following are five trends concerning retirement planning for 2021.

Possible Increase in Unplanned Retirements

Consequently, employees-particularly those in their prime earning years-should consider adopting a comprehensive emergency strategy for early retirement. Beyond selecting appropriate accounts and setting savings goals, people should think about the life they want to live in retirement, as well as key considerations such as health insurance, housing, and whether or not they intend to earn supplemental income.

Health Savings Accounts Could Grow More Widespread

“Health savings accounts offer a triple and sometimes quadruple benefit,” notes Liz Weston, CFP, the author of The 10 Commandments of Money. “Contributions are tax-deductible, the money grows tax-deferred from year to year, and withdrawals are tax-free if used for qualified medical expenses. Plus, many employers will contribute cash to the accounts as an inducement to sign up.”

Return of Required Minimum Distributions (RMDs)

There are, however, some COVID-19 relief measures that will positively impact retirees in 2021. Income limits on contributing to a Roth IRA have increased, and those who collect Social Security received a 1.3 percent cost-of-living adjustment starting in January 2021.

Pooled Employer Plans (PEPs)

In addition to lower fees and improved outcomes for retirement accounts, PEPs offer advantages such as better governance and streamlined administration. Some believe that PEPs could have as big an impact on the pension landscape as 401(k) plans did when they were initially introduced four decades ago.

More Opportunities to Save for Retirement

These workers should continue their frugal spending approach into 2021 as a means of continuing to boost their retirement savings and to get a better idea of how much they might need to spend per year in retirement. This can be achieved by tracking spending throughout the year and considering what costs can be cut out during retirement.

Originally published at https://robertmryerson.net on February 16, 2021.

Robert Ryerson authored the 2016 book What’s the Deal With Identity Theft?: A Plain English Look at Our Fastest Growing Crime.

Robert Ryerson authored the 2016 book What’s the Deal With Identity Theft?: A Plain English Look at Our Fastest Growing Crime.