New Year’s Financial Resolutions
Roof Advisory Group wants investors to start thinking about their financial resolutions for the New Year. Below are five resolutions that will help increase long-term financial security.
Increase your monthly retirement contributions in conjunction with raises.
Small, monthly retirement contributions over a period of time will make a big difference. Adding $100 extra a month with an average 6% compounded rate of return over a 30 years period will result in additional savings of $100,500±. During that time, the investor contributed $36,000±, and earn more than $64,500± in returns.
Maximize a 401(k) and IRA.
Find out how much your company matches and maximize the opportunity. Human Resources Professional will explain how the company match works and payroll deduction options. An employer match is an important and often under-used part of an employee’s compensation package. If a 401(k) or 403(b) through an employer is not an option, open an Individual Retirement Account, commonly known as an IRA.
Retirement catch-up provision.
There are special options for funding retirement for those age 50 and over. In 2019, the IRS increased the 401(k) retirement contributions limits to $19,000 and for investors age 50 or over, an additional catch-up provision of $6,000 annually is permissible. The catch-up provision enables those 50 and over to contribute $25,000 annually into a 401(k).
Investigate tax-exempt options.
Company matching on a qualified retirement plan is often the most effective savings tool, but an often-overlooked option is the Roth IRA which allows tax-exempt earnings, meaning, tax-exempt income in retirement.
Seek guidance from a professional financial planner.
Seek a fee-only financial planner for guidance. Fee-only financial planners do not receive commissions based on the products they recommend. The only compensation they receive is paid directly by their clients, which avoids potential conflicts-of-interest; therefore, keeping recommendations independent and objective.
A professionally created financial plan will not only detail a sustainable retirement income, but the plan will also help quantify required savings, realistic retirement date and help prioritize long-term goals such as charitable gifting and wealth transfer to the heirs. The results of a financial plan often motivate changes in financial behaviors such as spending and savings patterns.
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