Year-end 2020 statements will soon arrive, showing you what you have and how much you added to your accounts over the last 12 months.  This is your baseline on which you will improve.  From there, get specific with your increased savings goals – be it dollar amount or percentage increase.

1. Look at your individual retirement accounts.  How much did you put away?

• You have until April 15, 2021 to make a contribution for 2020 (this is a rare opportunity to right a wrong from 2020).
• The maximum you can put into an IRA or Roth IRA is $6,000 or $7,000 if you reach the age of 50 or older in the contribution year.
• For 2021, consider setting up a systematic investment program where a set amount gets invested every month right from your bank account.

Resolve to set yourself up for success by making a 2020 contribution and by using an automated system for investing in 2021, so you commit to monthly investments. Set it and forget it.

2. Now, take a look at your investments.

• Any money invested in the market should be for the long term – ideally 10 years or more.  Why? Because the market can be quite volatile day-to-day, month-to-month and even year-to-year.  But, over long periods of time, the markets have historically offered an average of 6-10% in returns.  The trouble is these returns can be wildly divergent each year and can scare investors into liquidating or not investing when the markets are difficult (think March 2020).  Train your mind to see the opportunity in adversity.  On the upside, a down market means prices are lower, so your fixed monthly investments will buy more shares.
• Do check what you are paying for your investments since excessive fees are always bad, but particularly devastating when market returns are nowhere to be found. Check your fund expenses here.
• As a point of reference, look at what your fund expenses could be if you were in a low-cost option, like Vanguard funds. Simply swapping out an expensive investment for a lower-cost option can make you money regardless of what the market returns. Which would you rather own: a fund with a 5% sales load and fund fees of 1% or a no-load fund with expenses of 0.07%?  No, this is not a trick question.  The gap in fees can be that wide.

Resolve to look at a down market as a long-term investor’s best friend because it encourages you to stick with your investment plan. 

AND

Resolve to not throw good money after bad; money is always better in your pocket than in someone else’s.   What is the impact of fees to your bottom line?  This calculator can give you an idea.

3. Look at your year-end pay stub.

• Did you contribute to your employer-sponsored retirement plan? Did you get a match from your employer?  The benefits/payroll department will know what you need to contribute to get the match.  With or without a match, increasing your participation by as little as 1% is still an improvement.
• For 2021, the maximum you can put into a 401(k), 457 or 403(b) is $19,500 or $26,000 if you are 50 or older. For Simple IRA plans, the maximums are $13,500 or $16,500, respectively.
• You may be surprised to find that increasing your contributions to your retirement plan may not materially affect your take-home-pay, because it lowers your taxable income; your payroll department should be able to offer some guidance.  Here is a basic calculator to give you an idea.

Resolve to get involved in your employer-sponsored plan, get the match or increase your savings rate per paycheck.

I’ve only scratched the surface.  There are many more elements to successfully handling your money, such as building a plan that reflects your goals/time frame and diversifying your investments appropriately.

But just developing the habit of putting money aside – and accomplishing that goal right away – may be the momentum you need to move the needle in the right direction and keep going.

Make 2021 the year you set and attain goals that will leave you better off for years to come.  I’m rooting for you.