We are already well into January, and some conventional wisdom indicates that by now most of us have probably, and conveniently, forgotten or ditched some or all of those new year’s resolutions that seemed so promising and reasonable on New Year’s Day.
Good.
With that out of the way, we can get serious and perhaps more realistic about the opportunities before us. Here are eight things worth doing in 2016:
1. Increase the regular contributions to your retirement plan. Assuming you are setting money aside in a 401(k) or similar plan, increase your contribution by one percentage point of your income. (More is better of course, but over a working lifetime, even one percentage point can be very meaningful when you’re ready to retire.)
You’ll probably find this small incremental change fairly easy to live with. Remember that next January, and do it again.
2. If you’ve already maxed out your retirement-plan contributions, increase the amount you’re contributing to your IRA, either Roth or traditional. This year, like last year, you can contribute up to $5,500 if you’re under 50 years old and up to $6,500 if you’re 50 or over. (However, your contributions cannot exceed your earned income.)
Just as with bumping up retirement-plan contributions, regularly adding more to your IRA can have a big payoff down the line.
3. If you’re already pushing against your retirement plan and IRA limits (and if you’re married), consider increasing the contributions to your spouse’s retirement plan or IRA. If your spouse doesn’t have earned income, he or she is still eligible to contribute to an IRA.
4. Within your retirement plan and your IRA, look for funds with lower expenses than the ones you have now. This doesn’t mean changing asset classes (that may be worth doing, but it’s a different discussion). It means finding a fund in the same asset class that will cost you less money to own.
Many retirement plans will let participants use a brokerage account to choose among thousands of funds, including low-cost index funds. Even if you have to pay a small fee to make do that, the results — better investment choices and lower costs — can be well worth it.