Smart Investment Moves for 2021

A new year is a good time to review your investment portfolio and make changes to improve it going forward. Check out these tips and resources: 

Review your asset allocation. Your asset allocation is the percentage of stocks, bonds, and cash across your entire portfolio of taxable and retirement accounts. Younger investors saving for long-term goals can invest more heavily in stocks that carry more risk but offer greater potential for growth. More seasoned investors still need stocks, but often add bonds and cash for stability.

Do the math to calculate your asset allocation. (Include your spouse's investments if you're married.)  Does your asset allocation still fit your needs and tolerance for risk, especially given 2020's volatility? Check out Investing Lessons from 2020.

Rebalance your holdings. Even if you want to keep the same asset allocation, market changes in 2020 could have knocked it off track. For example, your stocks might make up 70% of your portfolio, instead of the desired 60%. When your portfolio is several points out of alignment, it's time to rebalance, meaning you sell or buy securities to get back to your original allocation. See FAQs About Rebalancing Your Portfolio.

If you invest in a target-date fund,* each fund invests in a variety of underlying funds in proportions that gradually become more conservative over time.

Boost your retirement savings. The contribution limits to 457, 403(b), and 401 plans haven't changed for 2021. The most you can contribute is $19,500 a year, plus an additional $6,500 as long as you'll be age 50 at any time during 2021.

If you're not saving the maximum, consider raising your contributions. Putting pre-tax money into a workplace retirement plan reduces your taxable income, and increasing your contributions could have less of an impact on your take-home pay than you might think. For example, a worker earning $50,000 a year who boosts their contribution rate from 5% to 7% would see their weekly paycheck drop by only $15. Our Paycheck Calculator can run your numbers.

Invest in an IRA. If you can afford to save more, you can invest in an IRA. The maximum contribution for 2021 is $6,000, plus an extra $1,000 if you're age 50 or older. While that's unchanged from 2020, the income limits to qualify for a deductible IRA or a Roth IRA have been raised slightly.

For example, if you have a workplace retirement plan, you can direct some or all of your contributions to a traditional IRA if your modified adjusted gross income (MAGI) is under $76,000 if you're single and under $124,000 for joint filers.

Or, you can choose a Roth IRA. You won't get an upfront tax deduction, but your Roth withdrawals are tax free in retirement. You can make a full or partial contribution to a Roth IRA if your MAGI is under $140,000 if you're single and $208,000 if you're filing jointly.

It's also not too late to contribute to an IRA for 2020. The deadline is April 15, 2021.

Keep these smart investment tips in mind along your journey to retirement success.

Learn more about investing by visiting the Retirement Education Center.
Have additional questions? Contact your ICMA-RC Retirement Plans Specialist.

* A target-date fund is not a complete solution for all of your retirement savings needs. An investment in the fund includes the risk of loss, including near, at or after the target date of the fund. There is no guarantee that the fund will provide adequate income at and through an investor's retirement. Selecting the fund does not guarantee that you will have adequate savings for retirement.

Please note: The contents of this publication provided by ICMA-RC is general information regarding your retirement benefits. It is not intended to provide you with or substitute for specific legal, tax, or investment advice. You may want to consult with your legal, tax, or investment adviser to review your own personal situation. Some of the products, services, or funds detailed in this publication may not be available in your plan. This document contains information obtained from outside sources and it references external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy. In addition, rules and laws can change frequently.

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