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A lot of retirees will tell you that retirement seems like a while away until it’s not. As you begin eyeing retirement, preparing financially is one of the most important things you can do. As with most things in life, it’s always better to be overprepared than underprepared.

For people eyeing a 2030 retirement, here are three things to check off your retirement to-do list.

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1. Pay down outstanding debts

Ideally, you’ll go into retirement debt-free, but that’s not always feasible. Still, it would be best if you planned to eliminate as much debt as possible before retirement. Being debt-free, or as close to it as possible, gives you more financial flexibility in retirement when most people arguably need it the most.

The first debts you should prioritize are ones with high interest, such as credit cards. Credit cards routinely have interest rates in the double-digit range, so you want to avoid letting balances linger longer than they need to. Debts like mortgages and auto loans won’t be as easy to pay down because they’re generally much higher, but an extra payment here and there, or a little extra on top when possible, can help reduce the principal faster.

Paying down debts in the present can help you save much more money down the road.

2. Take advantage of an IRA

A 401(k) is the most popular retirement account, but it’s not the only one you should use. Both Roth and traditional IRAs are great options with unique benefits.

Roth IRAs allow you to contribute after-tax money and take tax-free withdrawals in retirement. Traditional IRAs allow for tax-deferred growth, and there’s a chance you can deduct contributions from your taxable income. Whether your traditional IRA contributions are tax-deductible depends on your filing status, income, and if you’re covered by a work-sponsored retirement plan like a 401(k).

A few things make IRAs a great retirement account option, including countless investment options, withdrawal flexibility, and low cost. The same can’t be said about a 401(k), which provides you with investment options, has minimal non-retirement penalty-free withdrawals, and can often cost 1% to 2% annually in provider fees alone.

Choosing between a Roth and a traditional IRA mainly comes down to your current versus projected tax bracket in retirement.

If you anticipate being in a higher tax bracket in retirement, a Roth IRA may make sense so you can pay taxes now and then get a tax break when your bracket is higher. If you anticipate being in a lower tax bracket, a traditional IRA may make sense because you can take the tax break now and then pay taxes at a lower rate in retirement.

3. Use a health savings account if you’re eligible

Health care is one of the largest expenses any retiree will face. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2023 will need around $315,000 saved (after tax) for healthcare expenses. A single person will need around $157,500.

To account for the rising healthcare costs, you should take advantage of a health savings account (HSA) if you’re eligible for one. An HSA is an account available to people enrolled in a high-deductible health plan that allows you to contribute pre-tax money and take tax-free withdrawals for qualified medical expenses.

For 2023, the most you can contribute to an HSA is $3,850 if you’re enrolled in a health insurance plan by yourself and $7,750 if you’re enrolled in a family plan. For 2024, the contribution limits jump to $4,150 and $8,300, respectively. Individuals 55 and older can add an extra $1,000 catch-up contribution.

If you’re going to be spending money on medical expenses — which data says you likely will — you might as well save for them and get a tax break along the way.

Generally, purchases with an HSA for nonqualified medical expenses will spark a 20% early-withdrawal penalty, but withdrawals can be made for any purpose once you turn age 65. If your balance is more than your current or anticipated medical expenses, an HSA can turn into a supplemental retirement account if you choose.

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