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In just a couple of weeks, 2013 will be a memory. We’ll all be one year older, one year wiser . . . and one year closer to retirement. Did you achieve your 2013 retirement goals?
Looking back, this was a great year for accomplishing retirement planning goals. Americans paid off $1.5 trillion in debt, which is the first step in laying a foundation for retirement investing. And for those who are already investing, the average 401(k) balance was at record-setting high of $81,000 by the first quarter of 2013.
The stock market continued to set records for the rest of the year and was up 25% by early December. For an average 401(k) with a balance of $81,000 invested in mutual funds that just kept pace with market performance, that’s an increase of $22,000!
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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 great 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 2014—and each following year—a success.
Set a Goal
Nearly half of all workers age 45 and older have never tried to calculate how much savings they will need to have a comfortable retirement. And many Americans haven’t saved nearly enough to support themselves in retirement. 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—a 401(k) for most of us. Dave recommends investing enough in your 401(k) to receive your full employer match, which is 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. It’s especially difficult 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.
Set up an automatic draft to remove the temptation to skip investing “just for this month.” 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 2014. Work with a professional who will give you advice you can trust as you make your investment decisions.
Each of Dave’s investing Endorsed Local Providers (ELPs) has the heart of a teacher and will take the time to make sure you understand how to get the most out of your retirement investing plan. Find your ELP today!