For hundreds if not thousands of years New Year’s has been celebrated. A more recent phenomenon is the New Year’s resolution. According to a 2011 Forbes article by Gretchen Rubin, only 44 percent of Americans make a New Year’s resolution. Further, according to a 2007 study by Richard Wisemen from the University of Bristol, 88 percent of people that made a New Year’s resolution failed.
So although it seems I am addressing the minority, I thought it would be a worthwhile exercise to discuss several “retirement resolutions” we can make this year that may help alleviate some of the most common fears people have about retiring successfully. According to a recent AARP study, the three top fears of people planning for retirement are: running out of money, having poor health and losing their independence.
Since maintaining your health or living a healthy lifestyle is outside the realm of my expertise, I will defer to my older clients who have told me “take care of your eyes, teeth, and skin”. So with that in mind; wear a hat, sunscreen and sunglasses. Floss your teeth and see your dentist regularly. I have also heard from several sources that a healthy diet and exercise may be important but I can’t personally vouch for that!
As far as maintaining your independence, a lot of that has to do with what health issues you may face later on in life. According to Medicare.gov, by 2020 there will be 12 million Americans that need at least some long term care and about 70% of those will be cared for by family and friends. Therefore, if maintaining your independence is important to you, get a long term care insurance policy so you can bring in professionals to help you stay in your home or if it is necessary to go to a facility, you may have more choices than you could afford without long term care insurance coverage.
Now, what are a few resolutions we can make this year to help ensure we won’t run out of money when we retire? First, make a written plan. American author Napoleon Hill said, “Reduce your plan to writing. The moment you complete this, you will have definitely given concrete form to the intangible desire”. A written plan will give you something you can measure your progress against and may reduce your anxiety about running out of money in retirement. Harris interactive recently completed a survey for Wells Fargo Advisors which found that 98 percent of investors with Wells Fargo Advisors Envision® plans say their plan lets them know where they stand in reaching their financial goals. The Envision process is a unique investment planning process used by Wells Fargo Advisors to help clients identify and prioritize goals, select investments suited to their objectives and preferences and track progress toward achieving their goals.
Secondly, try to save a little more. If you have a 401k or other retirement plan through work, try to make the maximum contributions. If your company matches your contributions, at least put enough in to your plan to take full advantage of the match. If you are self employed, try to max out your retirement plan. If you don’t have one, start one! If you have received a raise, get a bonus, or expect a tax refund, try to put some of that away for your retirement through a Roth IRA, Traditional IRA, or other investment vehicle that is designed to help you invest for retirement. Setting up a budget (pardon my French) can help you maximize your savings. Talking about a budget can tend to make people a little depressed, but all a budget does is help you identify your priorities and allocate your resources accordingly.
Lastly, make sure you are taking full advantage of every tax break legally available to you. The less you have to send to Uncle Sam, the more for your retirement. If you are interested in learning more on this subject, send me an email and I will be happy to send you our report titled, “Focusing on Upcoming Tax Changes-Ten questions you should consider now.”
My resolution for 2013 is to give a little more attention to the important things in my life. I tell my kids all the time, money isn’t important, it is just how we are able to take care of the things most important to us. May we all focus a little more on the important things this year and may you have a happy, healthy, prosperous New Year!
(Editor’s Note: Chad Winn is a financial advisor for Wells Fargo. He can be reached at 584-3017.)