Resolve To Make Your Retirement Plan a Priority in 2024

It’s 2024 – yes, already – which means it’s “that” time of year again. And by “that”, I mean the time when millions of Americans perform the sometimes anticipated, sometimes dreaded task of setting New Year’s resolutions in an effort to better ourselves in the coming year. The new year often feels like a fresh start and a great opportunity to change bad habits and establish new routines that can help us grow psychologically, spiritually, emotionally, socially, physically, and even financially. 

Of course, resolutions are much easier to make than to keep, and it seems that by the end of March, many of us have abandoned our resolve and settled back into our old patterns. As hard as I try, I sometimes find myself in this very situation, usually because I set goals that were too high or too many.  I’ve discovered over the years that I have a better chance of being successful if I pick just one or two to really focus on instead of trying to make a number of big life changes all at once. 

And get this, according to a recent study¹, researchers found that people were more successful at keeping approach-oriented goals (such as changing eating, sleeping or financial habits) rather than avoidance-oriented ones (which are motivated by a desire to avoid something). This suggests that, for example, you may be more successful if your goal is to strengthen your retirement plan than if it’s to give up alcohol or fast food. So with this in mind, let’s dig into why focusing on your retirement plan in 2024 may be easier than you think.

If you’re like many people saving for retirement, you’re probably socking money away in your company 401(k) or other similar retirement plan. Hopefully you’re getting a match from your employer as well. When saving for retirement is on autopilot like this, it’s easy to forget about it, especially when you’re raising a family, moving up the company ladder, and just trying to keep up with life.

But for many, as you approach your mid-fifties, such as myself, and thoughts of retirement start creeping in, this phase can also be sullied by financial worries, changing what should be a time of joy and anticipation into a source of dread. In fact, numerous studies have shown us that many retirees and pre-retirees are more worried about running out of money than they are of death itself. 

This concern is greater among married couples, who face the added complexity of planning for two people with varying financial needs. A recent study by NerdWallet² study reinforces this, indicating that 60% of Americans lack a retirement-specific account. 

The large disparity in average household retirement savings by age group further illustrates this issue. For example, the average retirement savings for those under age 35 is just $49,130 (with a median of just $18,800). Those between ages 45-54 have approximately $313,220 (with a median of $115,000), whereas those ages 55-64 have $537,560 (median is $185,000). These figures reflect a significant gap between the average and median savings, pointing to a broad range of financial preparedness across different age groups.

Guidance from T. Rowe Price³ suggests that we adhere to savings benchmarks as multiples of your income, varying by household income and marital status. For example, a dual income married couple with an annual income of $75,000 at age 55 should have retirement savings equal to five times their income, which should increase to 8.5 times by age 65. In contrast, a sole earner at the same income level should aim for 4.5 times their income at age 55, increasing to seven times by age 65. These benchmarks scale up for higher-income brackets.

If you are looking at these numbers and feeling a little financially insecure, it’s not too late. And what better time to focus on your retirement plan than right now, when the freshness of the new year offers an added incentive. There are a number of possible steps you can take to better prepare yourself for your Golden Years, starting right now.

For starters, don’t forget the basics - create a reasonable budget and stick to it. Tracking expenses helps identify savings opportunities and will help you to better determine your actual income needs in retirement.

Also, think outside of your employer-sponsored retirement plan. Consider an Individual Retirement Account (IRA) or perhaps a Roth IRA for additional savings. A Roth in particular can be useful in retirement due to its ability to offer qualified tax-free income.

If you’re carrying excess debt focus on paying it off, especially if you’re being charged high interest. This can subsequently free up additional cash for retirement savings. 

When factoring in your Social Security benefits, you might plan to postpone your benefits payments. Waiting until at least your full retirement age, or even to age 70, will result in higher monthly payments, for life. This may mean continuing to work later – but not only will it increase your Social Security benefits, but you’ll also continue to earn a paycheck and keep contributing to your retirement savings.

Folks, this is also an ideal time to create an overall retirement system, one that focuses on downside risk. A system using quantitative analysis helps you not only save for retirement, but also protects your money from unnecessary losses. As you near retirement, you have less time to make up for large market losses so it’s crucial that your plan transitions from purely growing your money to also protecting what you have. 

Are New Year’s resolutions for everyone? Maybe not. But even if they don't always stick, that doesn't mean that resolutions aren't worth making. And when it comes to your retirement, they present additional motivation to better your chances of a successful retirement. 

So as always - be vigilant and stay alert, because you deserve more!

Have a great week.  I hope everyone is having a wonderful Holiday Season.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. 

Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. http://tinyurl.com/yh3xb2z7 2. http://tinyurl.com/ep76xvfb 3. http://tinyurl.com/5n6ht679