Want to jump-start your retirement savings? New Year’s is the perfect time to reset savings goals that will help you retire with more optimism and confidence.
Yes, you probably have other financial priorities (e.g., paying down debt or saving for a child’s education) competing for your attention. But saving for retirement as early as possible helps you make the most of your money, urges Steven Sass, a research fellow at Boston College’s Center for Retirement Research. This year, resolve to put away as much as possible by sticking to these five New Year’s resolutions:
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,” notes Sass.
Often, people save just enough to earn their employer's match on their 401(k) and assume that will keep them on track. Often, that’s not the case—especially if you’ve changed jobs frequently or spent significant time outside the paid workforce.
Online resources can help you better see where you stand. Truist provides a simple Retirement Income Calculator that allows you to input your age, current savings and savings rate to get a clearer picture of your projected income in retirement. You can adjust factors to see how small changes could have a major impact on your long-term financial outlook.
2. I will put my savings on autopilot
Once you’ve examined 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 advises. Set up automatic contributions to your workplace retirement plan or IRA. If possible, try to increase your pre-tax deferral rate in your employer plan to at least 10%.
3. I will look for three ways to free up money to save
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 help you boost savings without making major sacrifices. Track your spending closely for a few months to help identify small changes that can add up to big savings.
4. I will review my investment allocation
Take time to look over your investment portfolio to make sure the mix of stocks, bonds and cash is appropriate based on your age, risk tolerance and expected retirement income needs. If you’re unsure and want a professional opinion as to whether your current investment approach has a high probability of success, your Truist Wealth advisor can help. 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 IRAs. This allows you to increase your savings above the usual annual limits. Often at this age you’re making a higher salary and/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 from now until you retire, and watch your account balances grow.