As we usher in the new year, it is an opportune time to make financial resolutions that will secure your financial future. Whether you are new to investing and personal financial planning or you are approaching retirement and contemplating estate planning, here are some tips for making the most of your financial life in 2024!
- Build or Enhance Your Emergency Fund
In an era marked by economic uncertainty, we all need a robust emergency fund. What does this mean? Having three to six months of living expenses in a money market or high yield savings account. Peace of mind comes with knowing you can cover unexpected expenses in the case of emergency or job loss.
- Pay Down Debt
In today’s world of high interest rates, it is imperative to not carry “bad debt”. What is bad debt? Credit cards, personal loans and some car loans are all examples. The interest on some of these debt instruments can be financially crippling. Come up with a plan to tackle the debt sooner rather than later.
- Review Your Credit Report and Credit Score
Federal law gives you the right to get a free credit copy of your credit report every 12 months from the three nationwide credit bureaus. To get the free credit report, go to AnnualCreditReport.com. Review for any inaccuracies and report them right away. Make a plan to increase your score, if needed, by making timely payments and attacking outstanding debt. A strong credit score is the key to favorable interest rates when financing a house, car, or other business opportunities.
- Meeting Your Match
Many companies offer a match in contributions to retirement plans. There is a reason that this is called “free money”. You do not have to earn the money. You need to contribute enough to get the match that the company provides. Most companies match 50% or 100% of your contribution, up to a certain percentage.
- Increase Your Retirement Contributions
Beyond just getting a match, you should increase your retirement plan contributions each year and certainly when receiving any type of raise or bonus. The 2024 contribution limit for 401(k), 403(b) and most 457 plans is increased to $23000 up from $22500. The catch-up contribution for those turning 55 or older in 2024 is $7500. The limit on annual contributions to an IRA plan will increase to $7000, up from $6500. If you are over 55, the limit is $8000. Also consider whether a Roth 401k or IRA is a good option for you. You need to weigh whether it is more advantageous to pay taxes now or later on the contributions to your retirement accounts. Having both a traditional retirement account and a Roth retirement account may give you the tax flexibility that you need in retirement.
- Review Social Security
Social security makes up the bulk of many Americans’ retirement income. Do you know how much you will get at full retirement age? Do you know that you receive about 30% less if you take your social security payment at age 62? Do you know that you can wait until age 70 to begin your payments and realize a significant pay increase of 8% for each year that you wait? Be cognizant of how much you can anticipate receiving in retirement and how much your spouse will receive. Work with a financial planner to strategize the possibility of staggering claiming ages to reach your retirement goals.
- Pension Calculation
About 20% of Americans receive a pension. This is a stream of payments that come each month in retirement. Do the research now to calculate at what age your pension will be maximized. Also, find out what options you may have in retirement to provide for a spouse. There also may be the ability to consider a lump sum payment in lieu of monthly payments. Knowing all your options will allow you to calculate how much additional money you may need to save to have an enjoyable retirement.
- Consult a Financial Planner
It is never too early or too late to see if you are on track for retirement. A good financial planner is a trained professional in the field and can assist you in setting and achieving your financial goals. A financial planner can also evaluate your investment options and suggest suitable investments for your risk profile. Many planners will also help optimize your tax strategy and possibly save you money in the long run.
Securities offered through LPL Financial. Member FINRA/SIPC. Advisory services offered through Trombley Associates, a registered investment advisor and separate entity from LPL Financial.
This material was created for educational and informational purposes only and is not intended as ERISA tax, legal or investment advice.
If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Barbara Trombley is a financial planner with Wilbraham-based Trombley Associates Investment and Retirement Planning.