BY JOHN CONROE, CFP, AFIM
Early in the year is a great time to stop
and take stock of your life, your goals and
your accomplishments. By and large the most
commonly referenced New Year’s resolutions
involve money and health. A quick Google
search finds saving money and managing
debt right up there with losing weight and
quitting poor health habits.
But just when the coldest part of the
winter makes exercise less convenient and
comfort food harder to ignore, the arrival
of tax documents and year-end statements
makes it a natural time to review your retirement
planning. Dreaming of golden years
spent on sun soaked beaches is also a great
incentive to freshen up your personal escape
plan and maximize your chances of a worry
free retirement when the winter winds blow.
So let’s take a look at four resolutions that
can boast your odds and bring peace of mind
as you approach life’s second act.
Take time to assess your current retirement
readiness:
One of the primary steps in financial planning
is gathering information and analyzing
the situation as it stands today. As the normal
flow of tax documents, year-end credit card
and asset account statements flows in, keep a running tally.
Fill out a balance sheet, adding up all your
assets and subtracting your debts. Take a
few minutes (with plenty of cold, snowy days
here in the Northeast, that shouldn’t be hard
to find) and utilize a good, robust on-line
retirement calculator like the Adirondack Trust’s Retirement Self-assessment Tool
– that is found on our Investment and Planning
section (then go to the right hand side
of each page).
Be as accurate as you can in projecting
your retirement expenses or barring that,
use at least 75 percent of your current pretax
income. Don’t be afraid of the results,
instead embrace them and be glad you still
have time to prepare, taking satisfaction in
knowing that you have already taken the first
step by assessing where you stand.
Find more money to save:
If you’re able to meet your bills, put food
on the table and cover unexpected expenses
then you can probably find a few dollars here
or there to direct toward your future retirement.
If you expect a tax refund, allocate
part or all of it to your IRA. Same thing with
any year-end bonuses you might have earned.
But even if none of those are in the cards,
it’s likely you can still find something to cut
out that will let you increase your regular retirement
contribution by a few more dollars.
There are countless techniques for tricking
yourself into saving money:
Save every $5 bill that comes into your
hands. Round up every purchase or check
amount in your register then sweep the
excess into the retirement vehicle of your
choice.
Brown bag your daily lunches and tell
your Human Relations department to up
your IRA/401(k) contribution by the amount
you used to spend on salads, burgers and
sandwiches.
Figure your 2015 weekly gas savings from
lower oil prices and put it away. Get around
to refinancing your mortgage at today’s ultralow
rates and save the savings, Shop your
home and auto insurance (and umbrella)
and bank the difference.
Renegotiate your cable and cellular plans
and set up an auto-savings for the monthly
amount you wrestle back from your providers.
The point is that saving more money is
always better, and though it seems like its
harder, it can actually be quite easy. The
more you put payroll automation and digital
banking to work for you the less you’ll miss the money. Every dollar you save this year
will have time to grow and provide for you
down the road.
Consider your current asset allocation:
At Adirondack Trust, we spend time with
our clients to figure out their goals and
needs, tolerance for risk and time horizon.
This information helps us arrive at an investment
objective. Do they need growth,
or is income a priority? Can they handle
market swings and do they have the time
and resources to wait for a recovery? These
answers bring asset allocation into focus.
How much to commit to growing but more
volatile stocks, what percentage should be in
safe, yet low yielding bonds and finally, what
level of instantly available cash is required.
Once we know this information we can
build out a new portfolio or rebalance an old
one. This is a great time of year to consider
all those same factors as they relate to your
retirement portfolio and to make any subsequent
changes.
Meet with a financial planner for a
check-up:
Eliminate the hard work and have a
professional review your finances. This is
the teamwork approach to meeting your
retirement goals and relieving your worries.
Look for strong resources, solid credentials
and a reputation for integrity. You can find
planners that will charge you flat fees,
work by the hour or simply wave fees if you
move some assets to them for professional
management. Sometimes it’s best to get
an outside view of your situation. We do it
with doctors for health issues, mechanics
for automotive concerns, lawyers for legal
problems and accountants for taxes. Why
not put a professional financial planner on
your team as well?
Resolutions are great if you actually
achieve all or even part of them, but they can
be a great source of guilt and worry if you fail,
and they usually represent a real need. This
year, resolve to stack the odds in your favor,
for 2015 and for the rest of your life.
Conroe is a financial planner and investment
officer with Adirondack Trust Co.
Photo Courtesy Adirondack Trust Co.