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5 Retirement Resolutions For 2015

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2014 has ended and it’s time to start thinking about how to make 2015 a financial success. If you’re preparing for retirement or are already retired, we recommend that you take some steps to help ensure that your retirement is on track.

1. Stay informed about markets, but focus on your own game plan

The only constant in financial markets is change. Markets go up, down, and sideways, and it can be a struggle to keep your equanimity when your account balance fluctuates month to month. What can you do? You can take a deep breath and focus on your own goals and strategies.

We believe the worst thing you can do is hit the panic button and cash out. We don’t advocate never changing tactics when conditions shift; as professional money managers we are constantly evaluating markets for opportunities and threats. However, we always keep our clients’ goals uppermost; sometimes sitting on our hands is the best thing to do for our clients.

It’s impossible to completely avoid risk when investing. What you can do is understand risk, reduce it, and mitigate what you can’t eliminate through diversification* and other risk management techniques. You can also build retirement strategies that help protect portions of your income and guard against market volatility.

2. Contribute the maximum to your retirement accounts

If you haven’t maxed out your employer-sponsored retirement plans or your IRA, now’s the time to top up. Tax-advantaged retirement accounts are one of the most valuable tools in your retirement toolbox, and you definitely want to make the most out of this resource. We generally recommend contributing to an employer-sponsored plan first to take advantage of any employer matching.

Although anyone with taxable income can contribute to a Traditional or Roth IRA, the amount you can contribute and your eligibility for tax deductions depends on factors like your income and tax filing status. If you are married and file jointly, you and your spouse can each contribute to an IRA as long as one of you is earning taxable income.

In 2015, you can contribute up to $5,500 to a Traditional or Roth IRA, and up to $18,000 to a 401(k), 403(b), most 457 plans, and a Thrift Savings Plan. If you are 50 or over, you can contribute $1,000 more to an IRA and $6,000 more to your employer-sponsored plan.

 3. Don’t wait until the last minute to make contributions

We see it all the time: you’re filing your taxes and realize that you haven’t contributed the maximum to your IRA or workplace retirement plan. However, by waiting, you’ve missed out on months of potential market growth. Don’t fool yourself into thinking you’ve gained something by trying to time your investing. Repeated research has shown that attempting to time markets is a losing proposition; according to one study, regular investors gave up 2.5% a year over institutional investors, largely because of jumping in and out of markets.

Time in the market is worth more than timing markets. By making your retirement contributions early – or at least regularly – you give your investments more time to potentially grow.

4. Run the numbers on your retirement

Whether you’re preparing for retirement or are already retired, it’s a good idea to take a look at the numbers behind your retirement lifestyle. Millions of Americans are at risk of running out of money in retirement and if changes need to be made to your strategies, you want to know as soon as possible.

We recommend evaluating several areas to make sure the numbers add up:

  • Expense tracking and forecasting: By using current expenses and income as a starting point, analyze the cost of your desired retirement lifestyle.
  • Retirement income: Review your income from Social Security, defined benefit plans, or any other sources.
  • Gap analysis: By subtracting your monthly expenses from your income, you’ll know how much you will have to cover from your savings and investments. A financial professional can help you understand how different withdrawal strategies will affect your finances.
  • Healthcare strategies: Research suggests that the average 65-year-old couple will need $220,000 to cover all of their medical expenses in retirement. Since Medicare only covers about 60% of healthcare costs for those over 65, advance preparation is critical to making sure you can afford the care you need when you get older.

5. Get a retirement strategy checkup

If you’re not confident about retirement or have questions about your strategy, speak to a financial professional about getting a retirement strategy checkup. Most qualified independent financial advisors will be happy to give you a complimentary initial consultation to help you understand your situation.

Still have questions about retirement? Check out our free retirement resources at: http://www.frossandfross.com/resource-center/retirement.

*Diversification cannot guarantee profit nor protect assets in widely declining markets.