The year 2017 is upon us, and like all other New Year’s, many of us take this time to improve ourselves through New Year Resolutions. Sadly, per a recent Fidelity study, only 36% of us are determined to improve our financial situations through this declaration of self-improvement. With this in mind, here are our top three New Year Financial Resolutions for pre-retirees this year.
1. Give your 401k a boost
A general rule of thumb is that you should contribute enough to earn the maximum match from your employer – at the very least. Those who can manage to defer more of their salary to their plan should not allow complacency to prevent this from happening. Utilize components of the plan that will help you save more, such as electing the automatic contribution increase option. For high earning pre-retirees that got a late start at building up retirement assets, consider deferring the maximum amount allowed by the IRS ($24,000 at age 50 and above).
2. Review previous employment accounts
If you nearing the end of your career, chances are you have been employed at multiple companies with varying benefits. A growing number of 401ks, pensions, and other perks throughout your career can make it difficult to keep track of your situation as you near retirement. Leaving behind old retirement benefits can result in unwanted market risk being taken, as your investments at old employers are likely more aggressive than your current 401k allocation. In some cases, old retirement benefits can even be forgotten, leaving a plan provider with limited ability to make you aware of your benefits if you’ve moved or changed names.
Consolidating old 401k accounts to your current employer or to a financial professional is an easy way to ensure that all your accounts are accounted for and are being managed properly.
3. Trim down concentrated holdings
As you approach retirement, one of the largest risks that can derail a retirement plan is unnecessary business risk. Ownership in employee stock and single stock holdings that have appreciated for years can mean that the performance of your retirement savings can be far too reliant on a single company. Diversifying is always important, but it is especially important as you approach retirement. So even if the stock has done you well over the years, it may be worth selling to eliminate such risk.
*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.