Every year, the well-meaning among us tackle a well-worn list of resolutions: Lose a few pounds, save bit more and so on.
Often, resolutions are short-lived, to our dismay. It’s the same reason we fail to be successful at retirement investing: Old habits die hard. New habits are difficult to start.
Yet habits tend to lead us to success. In life, you must set concrete goals and build toward those goals little by little, nonstop.
In short, you need habits. Here are five achievable retirement saving habits you can use to get your retirement resolutions on a path toward sticking.
Remember, first set a real goal. It might be “I will have $1 million by age 60” or “I will retire at 65 with 100% of my current income.” However you phrase your goal, definitely write it down ― on paper ― then consider these simple habits, phrased as resolutions:
1. “I will spend less this year than last.”
Go to your online checking account or bill pay service and download a spreadsheet of your total spending over 12 months. Try to get an accurate, fair number. Now, what could you do without that will have a material impact on your spending habits? Aim for 10 percent less spending.
2. “I will save more this year than last.”
If you find that magic single item that cuts your spending by 10 percent, that’s great. More likely, it will be a category of small expenses, such as eating out. Whatever the source of the spending, eliminate it and instead set up an automatic draft of that amount into your savings account.
Automation is the key. Retirement saving and automated retirement investing should be just another monthly bill you pay, like clockwork.
3. “I will rebalance my retirement accounts periodically.”
It’s easy to do but unfortunately also easy to forget. Rebalancing is nothing more than selling investments that have gone up in value and using the resulting cash to buy investments that have declined. Done properly, rebalancing restores your retirement portfolio to your targeted mix.
As the years pass, that mix might slowly take on a more conservative bent. Still, you should rebalance to guarantee that you take gains when they are available and buy investments when they are comparatively cheap.
4. “I will take full advantage of tax breaks.”
Data from Fidelity Investments show that American workers who save through 401(k) plans usually do just enough to get their corporate match. Considering that they could be maximizing those plans to reduce taxes now, that’s an amazing misstep. It’s also the reason Americans retire with such low personal savings balances.
You are not “helping” the government by paying higher taxes if in doing so you end up dependent on public assistance in your golden years. The tax breaks on savings are there for a good reason: Use them fully.
5. “I will set an example for my family.”
Retirement investing is not about getting rich quick. It’s not about timing the market. It is about making sure that your children are not forced to sustain you in your old age, simple as that.
Parents know that kids never do what they say. Rather, they do what you do. Set an example for them by saving programmatically and by sharing with them your thoughts about finances and responsibility.
Saving more and spending less are easy resolutions to make and easy to forget as the year grinds on. Making those resolutions your new, powerful habits is the key to long-term retirement success.