12 Retirement Resolutions for 2012
Save $500 more next year. Consider resetting the automatic contribution to your 401(k) to include an extra $42 per month. The contribution limit for 401(k)s, 403(b)s, and the federal government's Thrift Savings Plan will increase by $500 in 2012, to $17,000. And workers age 50 and older will be able to contribute an extra $5,500 next year. "Always allocate a percentage to your retirement account from your paycheck before you spend, even if it is a tiny amount," says Elaine King, a certified financial planner and managing director of wealth planning at Lubitz Financial Group in Miami. "It is the discipline that counts."
Get a 401(k) match. If you're unable to completely max out your 401(k), aim to at least save enough to capture any 401(k) contribution match your employer offers. For example, if you earn $50,000 and your company offers a match equal to 3 percent of pay, your nest egg could get an extra $1,500 boost.
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Put some of your savings in a Roth. Consider allocating some of your retirement savings to a Roth 401(k) or Roth IRA account, especially if you're young or in a low tax bracket. While you won't get an immediate tax break, Roth accounts give you easier access to your money before retirement and more withdrawal flexibility in retirement. The $100,000 income limit for converting a traditional 401(k) or IRA to a Roth was eliminated in 2010, which means almost anyone can allocate some of their retirement savings to a Roth account in 2012.
Scrutinize 401(k) fees. Those with 401(k)s will have access to more information about the costs and fees deducted from their accounts, thanks to a 2010 Labor Department regulation that goes into effect in 2012. Pay close attention to mailings from your 401(k) plan next year and use this information to minimize the fees you pay. "You'll be receiving a new type of quarterly account statement from your plan sponsor that details the actual dollar amounts charged against your account and mutual fund choices," says Mark Miller, a Reuters retirement columnist and author of The Hard Times Guide to Retirement Security. "The easiest way to determine if you're paying too much is by making an apples-to-apples comparison between a passive index fund in your plan—say, an S&P 500 fund—with the same fund offered elsewhere. If your plan's fund charges 75 basis points, but you could buy the same thing in an IRA for seven basis points, ask your employer why—nicely."
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