Tips for Staying on Track in the New Year
The New Year presents an opportunity to think anew about your financial future. According to a recent survey by TIAA-CREF, 77% of Americans resolve to save more money in 2011; 41% cite saving for retirement as their top priority. Here are some tips for staying on track in the New Year.
- Emergency funds – Try to amass at least three months of savings – and preferably six – to cover basic expenses in the event of an emergency or interruption in your income.
- Credit cards – Determine which of your credit cards carries the highest interest rate and eliminate the balance on that card first.
- Give your savings a raise – If you are fortunate enough to get a pay increase, put that amount aside for retirement. While a useful rule of thumb is to save 10 to 15 percent of one’s income, even a little saving can make a big difference. For example, saving $25 a week for 30 years can yield as much as $165,000.*
- Look to free up money – Take a look at your spending patterns. For example, can you drive your old car another year or two to avoid a car payment on a replacement.
- Contribute to an IRA – An Individual Retirement Account (IRA) is a great way to boost tax-advantaged savings for retirement. You can continue to make contributions to a 2010 IRA or Roth IRA until April 15, 2011 – subject to annual limits. While you can contribute up to $5,000 a year to an IRA, you also can contribute much less.
- Don’t leave free money on the table – If your employer offers a retirement plan and offers to put some money in for you, find out how it works and take advantage of it. Nearly a quarter of workers don’t participate in their employer’s retirement plan (The Wellness Council of America, 2010). Of those who contribute, nearly a third of workers don’t contribute enough to take advantage of their employer’s full match.
- Rebalance on your birthday – To help ensure that your investments align with your goals, use your birthday as an occasion to review your investments and adjust them as necessary.
*Figures based on 5% annual interest rate, compounded monthly, with contributions made at the beginning of the month. This rate of return is hypothetical and does not reflect possible expenses. If expenses were shown, net returns would be lower.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.
Please note that investing involves risk and possible loss of principle.
Neither TIAA-CREF nor its affiliates offer legal or tax advice. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.