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As you bid farewell to 2014, don’t miss this one, undeniable, universal truth: You are one year closer to retirement! The good news is that 2014 was a great year for making progress toward your retirement goals.
Employer retirement plans and Individual Retirement Accounts (IRAs) continued their winning streak this year. Halfway through 2014, the average 401(k) balance was at a record-setting high of $91,000, according to Fidelity Investments. People who’d been investing in their 401(k)s for at least 10 years saw their average balance reach nearly $250,000, and the average IRA balance was up nearly 15%.
While the stock market slowed down a bit this year, market growth was still the main contributor to retirement account growth. The S&P 500 was set to end the year up 11% by early December—a drop from last year’s 25% gain, but strong enough to add $10,000 to the average 401(k) balance!
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But we all know that retirement investing isn’t about a single year’s performance. A new year is on the way, and while we hope for another productive year for our investments, it may not turn out that way. It’s best to focus on the things we can control so we can make the most of our retirement plans.
Here are a few things you can start thinking about now that will make 2015—and each following year—a success.
Set a Goal
Nearly 60% of all workers have no idea how much savings they will need to afford a comfortable retirement. And many Americans haven’t saved nearly enough to support themselves in retirement—36% have less than $1,000 saved. These two facts together make it clear that saving for retirement without a specific goal will likely lead to disappointing results.
An experienced financial advisor can help you determine your retirement savings needs and show you how to reach that goal with a plan you can have confidence in. And, if you’re just beginning to invest for retirement, it doesn’t take a lot of money to get started. There’s no reason to put it off!
Most people start retirement investing through their employer plan like a 401(k). Dave recommends investing enough in your 401(k) to receive your full employer match, usually 3–6% of your salary.
To have a secure retirement, however, you’ll need to invest 15% of your income. That’s where a Roth IRA comes in. You can invest up to $5,500 per year ($6,500 if you are 50 or older) in a Roth IRA. For most people, investing in these two accounts will more than meet their 15% goal.
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One of the toughest challenges of retirement investing is remaining consistent, especially when the stock market freaks you out so much that you can’t stand the thought of sinking another dollar into your mutual funds.
But consistently investing the same amount each month actually helps reduce your risk by lowering the average cost of the mutual fund shares you invest in. That makes it easier for your retirement fund to rebound from hard times in the market.
Remove the temptation to skip investing “just for this month” by setting up an automatic draft. You’ll find that your budget works just fine without that money.
Get Professional Investing Advice
An experienced financial advisor can help you put all these tips to work so you can make even more progress toward your retirement goals in 2015. Work with a professional whose advice you trust—someone who will take the time to make sure you understand how retirement investing works so you can make smart decisions.
We can put you in touch with an experienced investing pro in your area who has earned Dave’s recommendation for excellent service. Get a head start on your 2015 goals, and contact your advisor today!