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This is the month to tweak your retirement savings plan

Whether you are just starting to save for your retirement or if you have been saving for 20 years, January is a great time to make the little adjustments that can make a big difference in your retirement. 
 
For most people, where is the first place to start?
The first place is their 401k contribution amount.  If you are not at the max you can contribute per year then try increasing just 1% each year, if your company offers it, set your contribution to automatically increase every January 1%.  The second part of the 401k contribution review is to make sure you are contributing at least enough to get the full company match towards your 401k.  This is a great way to achieve the goal of saving at least 15% for retirement.
 
Is there anything else regarding your 401k that should be adjusted regularly?
It is always important to look into any new investment options available in your 401k plan. It is also a good idea to rebalance your 401k portfolio so that the investments balances match your risk tolerance. The final review item is to make sure your allocation of your 401k contribution is still relevant to your situation.
 
What would be considerations for changing your allocations?
A couple of items, one is how close you are to retirement.  The closer you are to retirement, the less aggressive your investments options might want to be.  The second reason is if you have become move risk averse over time and want to be more conservative in your investment options. Really, it all depends on your situation and risk tolerance.
 
Should we save what can, or save what we need?
We should always focus on saving what we need to reach our retirement goals. For many this may not be realistic if they are just starting out or struggling financially.  In these cases, know what you need to save and then start with what you can save and work each year to achieve what you need to be saving.  The longer one waits, the more they will need to save to reach their retirement goals. Focus on saving a % not a dollar amount, this will help make it more achievable.
 
How should saving for college fit into retirement savings plans?
Look at things that can help you financially,  such as using a College Savings 529 plan to possibly be a benefit for reducing taxes but don’t start saving for college and ignore your retirement savings.  There are so many ways to pay for college but only one way you can fund your retirement.


Posted: 1/15/2015 with 0 comments

Categories: Money Matters, Retirement



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