Outside the Box: Adopt these resolutions for 2019 and change your life for the better

Many of us view the start of a new year as an opportunity to wipe the slate clean and face the world as a new and improved version of ourselves. A YouGov poll found that eating better and exercising more topped the list of Americans’ resolutions. While these are commendable goals, I believe that one of the most beneficial ways to be good to yourself is to take better care of your finances.

While it’s always great to start with the basics, like setting a budget or creating a written financial plan, I’d also encourage you to think ahead. Setting yourself up for a comfortable retirement takes thoughtful preparation and ongoing discipline, so the earlier you instill good financial habits, the easier the task will be. Here are some retirement resolutions to add to your 2019 list.

Start saving as early as possible

While everyone’s needs in retirement are different, the average saver should strive to develop a retirement portfolio 25 times as large as the amount they expect to withdraw from it during their first year of retirement. Achieving such a significant balance doesn’t happen overnight, and simply stated, the sooner you start saving, the more time your money has to potentially grow in line with the markets.

If you start in your 20s, you’ll likely be able to retire comfortably by investing 10% to 15% of your salary each year. If you wait until you’re 45 or older, you might need to save as much as 35% of your salary annually, according to a Schwab survey.

Younger workers have time on their side. The majority (69%) of millennials told Schwab in a recent survey that they expect their 401(k) will be their largest source of retirement income. With so much riding on the 401(k), it’s a good idea to sign up for your employer’s plan as soon as you’re eligible. If you don’t have access to a 401(k) at work, an IRA is another smart place to start.

Save at least enough in your 401(k) to get the full employer match, then try to save a little more

This tip could be considered 401(k) 101, but it bears repeating: resolve to save as much in your 401(k) as is required to take advantage of any and all matching dollars offered by your employer. A match can be structured in many different ways, but most employers who offer a 401(k) plan do provide one in some form.

For example, your employer might put 50 cents into your account for every dollar you contribute, up to 6% of your salary. In that case, you’d be prudent to set your contribution rate no lower than 6% to start so as not to leave any money on the table.

While the match percentage is a great initial target, the truth is that contributing 6% or so of your salary a year likely won’t be enough to help you meet your long-term goals. The start of the year often comes with bonuses and salary increases, so it can be a great time to bump up your contribution percentage.

Read: Why the retire-early crowd shouldn’t panic after an ugly finish to 2018

Talk to a financial professional

Whether you’re just starting out in your career or nearing retirement — or if you’re somewhere in between — it’s always a good idea to check in with a financial expert to make sure you’re on track. Fortunately, many employers offer some form of professional, third-party advice as part of their 401(k) plans.

There are plenty of reasons to work with a professional. They can help you assess your current financial situation, set short- and long-term goals and adjust your saving strategy to help you meet those goals. They can also assist with routine aspects of 401(k) plan maintenance, like rebalancing. With 2018 such a volatile year for the markets, the balance of different types of investments in your account may have shifted, and an expert can help you make any necessary adjustments.

Read: Life lessons of the rich and famous: Why you need an estate plan

Only borrow from your 401(k) as a last resort

Between travel, gift-giving and everything else the holidays entail, you may be feeling a bit strapped for cash. When things get especially tight, it might be tempting to dip into one of your retirement accounts for some near-term relief. However, borrowing from your 401(k) should only be a last resort.

A 401(k) loan can have severe consequences that follow you well into the future. This kind of loan must be repaid with after-tax dollars and usually comes with a hefty penalty if you leave your job and can’t repay the full balance.

Read: How likely is it that Social Security will go broke?

Even if your holiday spending doesn’t have you considering extreme measures, it can’t hurt to resolve to tighten your belt a bit anyway. In the aforementioned Schwab survey, 401(k) investors across all age groups said they wish they’d spent less on short-term pleasures — like dining out, fancy clothes and vacations — to save more for retirement. So as we kick off a new year, resolve to take a forward-looking approach to your finances. Your future self will thank you.

Catherine Golladay is chief operating officer of Schwab Retirement Plan Services.

The information contained herein is proprietary to Schwab Retirement Plan Services Inc. (SRPS) and is for informational purposes only. None of the information constitutes a recommendation by SRPS. The information is not intended to provide tax, legal, or investment advice; please consult with your accountant or investment adviser for how this applies to your specific situation. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Certain information provided herein may be subject to change. None of the information contained herein may be copied, assigned, transferred, disclosed, or utilized without the express written approval of SRPS and its affiliates. 1218-851N.

Filed in: Top News Tags: 

You might like:

The Number One: The $100 billion club saw its membership double overnight The Number One: The $100 billion club saw its membership double overnight
The Fed: Fed jettisons plans to lift interest rates this year as economy slows and inflation softens The Fed: Fed jettisons plans to lift interest rates this year as economy slows and inflation softens
Currencies: Dollar index drops to six-week low as Fed delivers dovish message Currencies: Dollar index drops to six-week low as Fed delivers dovish message
The Ratings Game: FedEx stock falls, but ‘green sprouts’ help keep most analysts bullish The Ratings Game: FedEx stock falls, but ‘green sprouts’ help keep most analysts bullish
The Ratings Game: Viacom stock sinks as network disruption looms, but AT&T-DirecTV could be the real loser, analyst says The Ratings Game: Viacom stock sinks as network disruption looms, but AT&T-DirecTV could be the real loser, analyst says
Want to profit from the housing shortage? There’s a new ETF for that. Want to profit from the housing shortage? There’s a new ETF for that.
Currencies: Dollar inches higher ahead of Fed decision, British pound falls on Brexit extension talk Currencies: Dollar inches higher ahead of Fed decision, British pound falls on Brexit extension talk
In One Chart: How the rich, the poor and the rest of us make and spend our money In One Chart: How the rich, the poor and the rest of us make and spend our money

Leave a Reply

Submit Comment
© 2019 Stock Investors News. All rights reserved. XHTML / CSS Valid.