If you’re not where you’d like to be with your retirement savings, then New Year’s is the perfect time to set savings goals that will allow you to retire with confidence. While you likely have additional financial priorities, such as paying down credit card debt or funding your kids’ education, saving for retirement as early as possible helps you make the most of your money, says Steven Sass, a program director at Boston College’s Center for Retirement Research.
This year, resolve to put away as much as possible. Here are five New Year’s resolutions that can help you reach your retirement income goals.
1. I will review my current savings rate. Preparing for retirement is a big job. “The biggest challenge is that people don’t know how much to save,” says Sass.
Often, people think that saving enough to earn their employer's match on their 401(k) means they're on track. However, that might not be the case, especially if you’ve changed jobs frequently or spent significant time outside the paid workforce.
Use online resources to see where you stand. SunTrust has a Retirement Income Calculator that allows you to input your age, current savings and savings rate to get a look at your potential income in retirement. You can change factors such as your retirement age and your monthly spending to see how they might affect your overall financial picture.
2. I will put my savings on autopilot.
Once you’ve looked at your overall retirement picture, you’ll have a sense of how much you’ll need to save each month. The best way to meet that goal is to save that money before it can reach your wallet, Sass says. Set up automatic contributions to your workplace retirement plan or IRA.
3. I will look for three ways to free up money for savings
If you’re having trouble fitting additional savings into your household budget, consider making a few lifestyle changes. Dining at home more frequently, cancelling an underused cable TV subscription or opting for more modest vacations can let you boost your savings without major sacrifices. To find small changes that can add up to big savings, track your spending closely for a few months.
4. I will review my investment allocation.
Take some time to look over your investments and diversify your portfolio—mix of stocks, bonds and cash—based on your age and retirement income. If you have any concerns or would like a second opinion on your current investment approach, consult a SunTrust financial advisor. Together, you can review your investments and make a plan to rebalance your portfolio if necessary.
5. I will take advantage of catch-up contributions.
If you’re over 50, you can make extra, “catch-up” contributions to your 401(k) and IRA plans. This allows you to increase your savings above the usual limits on these plans. Your circumstances might cooperate: Perhaps you’re making more money or your children are out of the house, which can free up money for savings. Resolve to max out your retirement plan and make catch-up contributions this year, and watch your retirement savings grow.