The new year is here, so it’s time to reassess your financial goals and establish resolutions for a secure retirement. After all, whether you’re decades from retirement or just a few years away, making intentional financial decisions now will pay dividends later.
To ensure a secure retirement, here are the top 10 financial resolutions and tips for sticking to them throughout the year.
1. Increase your retirement contributions.
Increase your contributions to retirement plans, such as an IRA, 401(k), or other savings plans, to ensure a secure retirement. Increasing your contribution by 1-2% annually is a good idea if you aren’t already doing so. With time, even a small increase can add up to a significant amount.
Tips for sticking to it:
- You can automate your contributions so they are deducted before receiving your paycheck.
- Every time you get a raise, commit to increasing your contributions.
2. Diversify your investments.
An investment portfolio that consists of only one type of investment can be risky. A well-diversified portfolio, however, consists of investments in a variety of assets like stocks, bonds, and real estate. In turn, this minimizes risk and maximizes potential returns.
Tips for sticking to it:
- Conduct an annual portfolio review and rebalance if necessary.
- Get advice from a financial advisor to ensure your investments fit your risk tolerance and long-term goals.
3. Pay down debt.
Your ability to save for retirement may be compromised by high-interest debt. As such, your first priority should be to pay off your credit cards, personal loans, and any other high-interest debt.
Tips for sticking to it:
- Stay motivated and focused by using the debt snowball or avalanche method.
- Unless absolutely necessary, avoid taking on new debt.
4. Explore annuity options.
In retirement, annuities can provide a steady income stream. As a result, they are an important part of a diversified retirement plan. Check out fixed, variable, and indexed annuities to see which suits you best.
Tips for sticking to it:
- Understand the pros and cons of annuities by consulting a financial planner.
- When unsure, start small and make adjustments as your confidence grows.
5. Build an emergency fund.
Even in retirement, a robust emergency fund is essential. Why? For unexpected expenses, it prevents you from having to dip into your retirement savings.
Tips for sticking to it:
- Put at least three months’ worth of living expenses into a high-yield savings account.
- Have your emergency fund automatically transferred each month.
6. Delay Social Security benefits.
You can significantly increase your monthly payments by delaying Social Security benefits until age 70. This strategy is incredibly beneficial if you’re in good health and expect to live a long time.
Tips for sticking to it:
- Calculate the impact of delaying benefits using online calculators, such as this one from the SSA.
- Set up a budget so you won’t have to rely on Social Security until later in your life.
7. Cut unnecessary expenses.
Saving for retirement can be accelerated by trimming your budget now — even if you’re far away from retirement. To start. find ways to reduce your spending by evaluating your spending habits.
Tips for sticking to it:
- Keep track of your spending for a month to identify patterns.
- Develop a “needs versus wants” approach to discretionary spending.
- Use tools like Rocket Money. This app helps you reduce bills, track spending, track your credit score, and cancel unwanted subscriptions.
8. Take advantage of catch-up contributions.
If you’re 50 or older, you may be able to contribute to your retirement account more than the standard limits.
The catch-up contribution limit for 401(k)s in 2024 and 2025 is $7,500, in addition to the $23,500 annual contribution limit. In 2024 and 2025, the catch-up contribution limit for IRAs is $1,000 in addition to the annual contribution limit.
Additionally, individuals aged 60 to 63 can increase their retirement contributions starting in 2025. This is called a “super catch-up.” For those years, the catch-up amount will be $11,250. It is, however, optional for employers to make this change so that each plan sponsor can decide whether to do so.
Tips for sticking to it:
- Review your account’s catch-up limits annually.
- You should adjust your budget to accommodate higher contributions.
9. Stay up-to-date on tax strategies.
Taxes can have a significant impact on your retirement savings. However, a tax-advantaged account and strategy can help you save more money.
By opening a tax-advantaged account, you can save on taxes and meet your savings goals. Some tax-advantaged accounts allow pretax contributions, which reduce taxable income. It is possible to delay paying taxes on dividends and capital gains as your money grows.
The most common are 401(k), 403(b) and 457 plans sponsored by employers, IRAs, and health savings accounts (HSAs).
Tips for sticking to it:
- Speak with a tax advisor about Roth conversions and tax-loss harvesting.
- Be aware of changes in tax laws that may affect retirement planning.
10. Regularly review and adjust your retirement plan.
Circumstances in life and market conditions will inevitably change. To ensure your retirement plan remains aligned with your goals, it’s important to review it annually.
Tips for sticking to it:
- Meet with your financial advisor annually.
- Stay on top of your retirement goals using online tools like the Charles Schwab Retirement Calculator.
How to Stay Committed to Your Financial Resolutions
Sticking to resolutions requires discipline and strategy, not just making them. To keep yourself on track, here are some additional tips;
- Set specific goals. The more vague the resolution, the harder it will be to achieve. Instead of saying, “I want to save more,” set a concrete goal like, “This year, I will raise my 401(k) contribution by 2%.”
- Create a vision board. Whether you want to travel the world or spend time with family in retirement, visualize what you want to do. By doing this, you will be motivated to stay on track with your financial goals.
- Use technology. You can monitor your progress with budgeting apps, retirement calculators, and investment trackers.
- Find an accountability partner. Your resolutions can be shared with a trusted friend, family member, or financial advisor who can help you keep accountable.
- Celebrate milestones. Don’t forget to recognize and reward your successes along the way. As a result, you may find yourself motivated to tackle larger projects in the future.
Final Thoughts
To have a secure retirement, you must plan carefully, work consistently, and make smart financial decisions. With these 10 resolutions, you can lay a solid foundation for a worry-free and comfortable retirement.
FAQs
What is a secure retirement?
You will not have to rely on others for assistance when you have enough savings to cover your living expenses. A few examples include housing, food, healthcare, and transportation.
How much money do I need to retire?
It depends on your lifestyle, where you live, and how much money you need to retire. Generally, you should aim to have 80% of your pre-retirement income after retirement.
When should I start saving for retirement?
You should start saving for retirement as soon as possible. As a result, you’ll have more time for your money to grow.
What are some good ways to save for retirement?
The most popular retirement savings vehicles are 401(k), IRAs, and health savings accounts (HSAs).
How much should I save for retirement each year?
Ideally, you should save 10-15% of your yearly income.
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