Financial and retirement resolutions for 2011

By Bill Losey

If the stock market and your declining 401k are making you feel like you’ll never be able to fully retire or become financially stable, you’re not alone. As the market is still on a rollercoaster and a lot is out of your control, there are some important things you should be doing. These financial and retirement resolutions are steps you should take in 2011:

In your 20s, 30s, and 40s
1. If you haven't started already, open an IRA and/or fund a 401k. These are generally the years when it's toughest to scrape together cash for investing, but starting young and having decades for tax deferred growth could lead to a nice six or seven figure portfolio in retirement. At a minimum, save enough to get a full match from your company.

2. Since you will likely have two to four decades before you'll need this money, consider investing 70% to 80% in equities/stocks. Do not be too conservative with your allocation.

3. Remember that your ability to earn an income is your greatest asset, so go back to school, continue your education, network, and do your best to make sure your job/company/career offer growth potential to carry you into your 60s and 70s. To navigate the employment landscape you will need to be nimble, be constantly learning, and be continually reinventing yourself to stay employable.

4. Like people in their 50s and 60s, you should reduce and pay down your non-deductible debt such as credit cards and auto loans. Try to be debt free, perhaps with your mortgage being the only exception, by the time you retire.

5. Finally, if you haven’t done so already, meet with a qualified estate planning attorney to have basic estate documents drawn up including wills, health care proxies, living wills, and powers of attorney. Additionally, make sure you have adequate life, disability, homeowners, and umbrella liability insurance to protect you and your family.

In your 50s and 60s
1. If you haven’t maxed out your 401k/403b contributions at work, you are eligible to take advantage of what is known as the catch-up provision. In essence, if you haven’t saved as much as legally possible each year you’ve been working, you are able to contribute an extra $5,500 per year (over and above the legal limit of $16,500) into your retirement plan in 2011.

2. If you have a spouse, family, and assets to protect, you should investigate long-term care insurance. Long-term care protects you and your family from the emotional, physical, and financial pain that a health issue can cause. Take advantage of 10-pay plans that allow you to pay off the entire cost of the policy in 10 years, while you still have earned income, a job.

3. Start paying down your non-deductible debt such as credit cards and auto loans. Try to be debt free, perhaps with your mortgage being the only exception, by the time you retire. If you can pay off your mortgage too, more power to you. This can free up a lot of cash flow and keep your expenses low in retirement.

4. Review your investments and asset allocation. Make sure you're NOT too heavily invested in equities (no more than 50% to 60%) or your own company stock (no more than 10%).

5. Consider accumulating up to three years worth of income in savings, CDs, money markets, or treasury bills. This is where you should start taking money from when you retire. Use this “safe-money” benchmark strategy so the money you need is in the safest yet lowest yielding investments where your principal is protected. This helps to weather the ups and downs of the stock/bond markets where the rest of your long-term money is allocated and diversified properly.

6. Finally, review your estate plans with an estate planning attorney, and consider reducing and eliminating unnecessary insurance coverage to free up cash flow for income in retirement.

Top two steps to make resolutions stick
1. Automate the savings process either directly through payroll deduction or monthly deduction from your checking/savings account.

2. Hire a fee-based advisor to coach you, keep you on track, and keep you accountable for achieving your goals.

Bill Losey, CFP®, CSA, America's Retirement Strategist®, is a highly sought-after advisor, retirement authority, thought leader, author, and national TV personality because he makes the complicated and mundane topics of investing and retirement fun. Bill has over 20 years experience in the financial services industry and is a Certified Financial Planner practitioner, a Certified Senior Advisor, and Certified Retirement Coach. He is the author of “Retire in a Weekend! The Baby Boomer's Guide to Making Work Optional” (a finalist at The Indie Excellence Book Awards), founder of National Retirement Planning Month, and publishes Retirement Intelligence®, an award-winning weekly newsletter that reaches thousands of subscribers worldwide. For a complete bio and media demo, visit www.myretirementsuccess.com. “Retire in a Weekend!” can be purchased from www.retireinaweekend.com or www.amazon.com. Bill’s Web site is www.BillLosey.com.