If you want to depart from the traditional new year’s effort to shed some pounds, how about aiming to become organized with your money and start investing an increased amount this year. It’s a worthy goal for those close to retirement in particular. With fewer years to let, their investments recover from the biggest stock-market decline in decades, more immediate steps are necessary to help keep finances in line.
The money saved can be used to pay off some debt and increase your retirement savings.
Here is a highlight of some resolutions for 2009 with relevance for retirement planning, as offered by a variety of personal finance experts:
How to REDUCE YOUR SPENDINGS
This is a good time to get a handle on your expenses and determine what can be the strategy you might have to use to reduce your spending or even eliminate some debts. Set a certain percentage – like 10% or 15% and aim to reach that goal.
Start acting as soon as possible Start with household spendings, be persistent and following the plan.Use grocery coupons, or switch the store you shop at, consolidate errands into one single trip, and eat out less.
THE IMPROTANCE OF STAYING INVESTED
The market is know for always fluctuating, it will eventually bounce back, and you have to stay invested to benefit. Investments in cash are for the short term and ultimately lose ground to inflation.
History has shown that discipline is often rewarded; it’s been noted that in the first year after the bottom of the tech bubble, the market was up 25%
DON’T PANIC – IT’S NOT HELPING
One skill you should exercise is – to stai calm, not to make hasty decisions.
People go to the extreme that they don’t even want to open the mail. Don’t put blinders on and deal with those financial statements that come in the mail and realized that there are other ways to deal with this issue. Once calm, you might realize that could be some miss opportunity on allocations or investment, you overlook. Nor is pulling back all investments, especially when it come to 402K or other retirement plans.
NCREASE RETIREMENT CONTRIBUTIONS
This might not be possible for those who are stretched, but it’s an excellent way to supplement funds depleted by the stock market’s decline.
If you are not maximizing your retirement contributions, you are leaving a lot off the table – tax savings and in many cases employer contributions.
PAY OFF CREDIT CARDS – A SMALL STEP, BUT IMPORTANT
Once you eliminated your card debt, use only one card and pay off balance monthly. Lingering credit card balances will only continue to chip away at your potential retirement income.
Another alternative is to cut off all your credit card, however, don;t forget to call first and close accounts, so the credit line doesn’t continue to show on your Credit Report.
If a person is a chronic overspender and just say that they will keep one card for emergency only, it doesn’t work any better then alcohol for a drunk.
HAVE ENOUGH FOR A YEAR RETIREMENT – WITH THE WRIGT PLANNING
Those in or near retirement, may need to tap an emergency fund to avoid drawing down their retirement savings earlier then planned.
Professionals are saying Emergency Funds in the “red zone” near the start of retirement, the last 5 years before retirement and the first 5 years after – should be large enough to last a year.
Strategizing about your investment and planning for the wright timing to retire is critical for your portfolio.
The probability of not running our of money is dramatically improved.
Check to see if you should re-balance your portfolio to make sure your assets allocations is in line with your investment goals.
If you are a traditional buy-and-hold investor, the percentage of stock in your portfolio will be at a low at the market bottom, leaving you poorly positioned to benefit from a recovery..
The strategy is to keep stocks at close to a set percentage of your portfolio that reflects your risk tolerance through thick and thin; for example: 60% stocks and 40% bonds.
SPEND LESS OF YOUR RETIREMENT SAVINGS – IT CAN BE DONE
Financial advisers have traditionally counseled spending no more then 4% of your savings in the 1st year of retirements, then subsequent year increasing slightly.
This strategy is deemed to give a retirement portfolio a very high probability of lasting for a 30 year retirement. The so called 4% withdrawal rule is only guideline, however.To calculate an appropriate withdrawal rate you want to factor in your age, health and age, recognizing that a spike in inflation or investment losses can impact the income generated by your accounts.
UPDATE YOUR WILL – A GOOD TIME TO HAVE IT DONE
You want to make sure your will is updated and reflect the correct information of the beneficiary of your choice are named on all documents, including insurance policies, IRAs and pensions.
Even so this might not sound like retirement advise, this is “no will, or a badly drawn will, can destroy your spouse’s retirement”, financial planners say!