Happy Tuesday!

I hope that you all had a wonderful holiday.

The new year brings with it new resolutions. And if you’re like most people, improving your finances appears at the top of your list.  This year, I want to give you three simple steps to take that can save you tens or even hundreds of thousands of dollars.  Not only are they simple, they involve something that you likely already have at your finger tips – a retirement account.

1. Contribute more money to your retirement account: I’ve seen several articles lately about the average and median balances of retirement accounts. A study from Vanguard of the retirement accounts that they administer showed that the average balance  (the aggregate balance of accounts surveyed divided by the number of accounts) has exceeded $100,000 for the first time. However, the median balance (where 50% of accounts are higher and 50% are lower) is $31,396.  Both of these figures highlight the fact that we aren’t saving enough for retirement. So increase your contributions. You should save at least 10-15% of your income. Also remember the contribution limits for 2015 are $18,000 and $24,000 for those 50 and over.
2. Consider low-cost, index funds: Fully funding your retirement account is a great start, but if you’re invested in high-costs funds you could be throwing thousands of dollars out the window. Remember, costs matter.  At the end of 35 years, a 1% difference in expenses for an account with $25,000 that grows at 7% results in $64,000 less in the account.  That number grows to $492,000 if you contribute the max for those 35 years.  Additionally, with these fees, you often don’t get what you pay for.  Low cost, index funds are a good way to lower your costs and diversify your investments. Check the expense ratios on your current funds and the administrative fees that may get passed on to you.  If you’re having trouble finding either, check out this website for some assistance.
3. Make sure you have the appropriate asset allocation: Lastly, you need to make sure that you have the proper asset allocation for your risk tolerance. We are riding a bit of a high right now since the stock market has produced nice returns for the past couple of years. But as they say, what goes up must come down. And if you’re heavily invested in stocks, you can pay the price when the market corrects itself.  You check to see if your portfolio matches your risk tolerance and is diversified in a way that matches that tolerance. If you’re not sure if it does or what that even means, I suggest seeking help from a good advisor.

Saving for your retirement is one of the most important financial moves you will make. So resolve this year to take charge of your investments and use these simple steps to improve your financial future.