This Week In Your Wallet: Are You Making This Retirement Mistake?
In case you missed it: #startTODAY is back for a Summer Savings Reboot! As we near the halfway mark of 2015, the “J Team” (that’s me, nutritionist Joy Bauer, fitness expert Jenna Wolfe and organizing guru Jill Martin) is reuniting to revamp (or maybe revive) those resolutions you made with us at the start of 2015. For my team in particular, that was saving more with the 52-Week Savings Challenge.
Some good news all around: many of you are saving more!
Commerce Department data shows a rise in incomes, and a decline in spending, has lead to a personal savings rate of 5.6 percent of after-tax incomes — the second highest level its hit since December of 2012. We’re in Week 24 of the challenge, which means — for those of you who’ve been going strong — you’ll sock away $24 for a grand total of $435 saved! And for those of you saying, “Yeaahh, about that…,” don’t worry, I’ve got you covered.
Last week on Today, I offered five ways to reboot your savings efforts, like taking advantage of discounts you’re entitled to. For example, you might be paying more for car insurance than you need to be, since 84 percent of Americans have never asked for the most common discounts (according to new data from insuranceQuotes.com). In most cases, your insurer won’t offer you a discount unless you ask for it, and discounts are generally available for self-reported driver information like mileage, marital status, occupation, academic standing and defensive driving skill.
You can psych yourself into saving more, too. Since we’re not necessarily hardwired to save (we prefer immediate gratification to delayed), I offered a few of my favorite mind games on Monday’s show. One idea: Use photos as constant reminders of what you’re saving for and why. Whether it’s a house, car or vacation — post photos in plain sight (i.e. desktop, refrigerator or as the backdrop on your phone) to keep you motivated.
Stay tuned for more!
Mid-Year Tax Moves
Now’s the time for a quick, mid-year tax checkup, too. Make sure you’re doing everything possible to limit what you’ll owe to Uncle Sam come spring 2016 with Kiplinger’s list of eight mid-year tax moves. First on the list? Make adjustments to your withholding if you’re fortunate enough to net a mid-year pay raise. If you receive a refund every year, and you’re on track to receive your usual next year, then consider fixing your withholding to boost your take-home pay. (Learn how to file a new W-4 form here.) Kiplinger has a calculator to help you figure out whether this makes sense for you.
It’s also time to reevaluate your 401(k) contributions. This year, workers under 50 can contribute a maximum of $18,000, and older workers can contribute as much as $24,000. (Last year’s limits were $17,500 and $23,000, respectively.) If anything, make sure you’re contributing enough to get your employer’s match. And if you can, try raising your contribution by $100 a month. It’ll cost you $30,000 over the next 25 years, but it will amount to nearly $100,000 more in your nest egg (assuming an 8 percent annual return).
The Rebalancing Act
Speaking of your 401(k), when was the last time you rebalanced yours? I ask, because MONEY reports most workers are failing to rebalance their accounts. According to a recent survey from Aon Hewitt only 15 percent of 401(k) savers rebalanced last year — one of the lowest rates on record.
That’s a problem. If not fixing your mix means you’ve got more in stocks than you intended, and if the market takes a tumble, then it will likely be more painful than it has to be. As Walter Updegrave says, rebalancing your retirement portfolio and flossing have something in common: A lot of people don’t get around to doing either as often as they should. I’ll leave the dental hygiene to your dentist, but as for rebalancing, I suggest doing so once a year (I use my birthday as a reminder to do it). The bottom line: A lot can happen in a year and your investments can get out of whack. For example, if you had 70 percent of your money in the stock market, and it’s now sitting at 80 percent, because it performed well, then you’ll want to go in and reduce your exposure.
What Not To Tell A New Yorker
Where’s the best place to retire in America? You might be surprised to hear it’s not Florida. Bankrate.com released its survey results for the best and worst cities for retirement. Comin’ in hot at number one: Phoenix, Arizona. In fact, The Grand Canyon State has three metro cities — Phoenix, Prescott and Tucson — in the top five.
Bankrate assessed 172 cities, looking at a number of different factors like weather, cost of living, crime rate, health care, tax burden and walkability. Overall, Phoenix came in first for its weather and high well-being score. The Big Apple, however, didn’t fare so well. As it turns out, the worst city for retirement is New York City. While the walkability is great — and the crime relatively low — the cost of living is astronomical, the taxes are high and the health care is below average.
Have a great week,
Jean
