10 Retirement Resolutions
The New Year always brings the urge to make promises to yourself–to eat healthier, exercise more, lose weight, and, perhaps most difficult of all, to save more money for retirement. A full 70 percent of Americans are concerned about not having enough money for a comfortable retirement, a recent Fidelity Investments study found.
So, as the New Year approaches, here are some strategies that won't do anything for your waistline but might improve your peace of mind as you plan for retirement.
Contribute to an IRA. Individual retirement accounts (IRAs) are currently the largest repository of retirement funds in the United States. Some 56 percent of Americans expect to rely on IRA savings for retirement, Fidelity found. But as of 2004, only 29 percent of families owned an IRA or Keogh, with a median value of $30,000, according to the Employee Benefit Research Institute (EBRI). The deadline for making a 2006 contribution to a tax-advantaged IRA is April 16, 2007, or the date you file your federal tax return.
Max out your 401(k). "I try to fund all the retirement accounts I can to the max," says Ed Slott, the author of Your Complete Retirement Planning Road Map. "The way to really do well is to keep putting more money in to keep funding as much as you can." Be sure to contribute enough to get your employer's full match. You should also account for all the 401(k) plans you've had at previous employers and consolidate them in your current employer's plan or transfer them into a rollover IRA, says Dallas Salisbury, president of the EBRI. Rolling a 401(k) over into an IRA allows you to avoid most fees and penalties.
Examine your investment portfolio. The New Year is the perfect time to look over your various retirement accounts and make sure you are getting a good return on your investments. "Over the long term, diversified stocks and bonds should return you 7 percent," says Jonathan Pond, the author of You Can Do It! The Boomer's Guide to a Great Retirement. "The average investor makes about 4 percent because they are perfectly happy to hold on to underperforming investments or they don't select good mutual funds or good investments." Pond recommends a diversified portfolio, selecting good investments, and continuously monitoring those investments to make sure that you average at least a 7 percent return.
Get rid of credit card debt. "Pay off your credit card debt because your investments will not be rewarding you at the same rate as your credit card debt," says Ted Allrich, the author of Comfort Zone Investing. Credit cards carry interest rates that can top 20 percent, as well as late fees and penalties. That is much higher than the return you can expect on most investments.
Pay down your mortgage. "Try to figure out ways to reduce your mortgage rather than add to it," says Pond. "You don't want to be paying off your mortgage when you're 80." He also recommends downsizing to a smaller home when you retire or even while you are still working. "Many people who live in urban areas can reduce their living expenses by up to 40 percent," he says, "simply by moving to lower-cost and often more climate-friendly locales."
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