It seems as if every year we make the same boring resolutions to save money, eat right, and exercise more. And then by February, you have a doughnut and a $4 coffee in your hand while driving to work and you've lost the ID card to get into your gym.
What's the trick to making New Year's resolutions stick? "Make the resolutions realistic and measurable," advises Hinda Dubin, the director of psychotherapy education at the University of Maryland. "It's helpful to write down your goals, and it's helpful to share them with a friend or significant other and ask them to help you with your resolutions."
There's perhaps nowhere goals can be more measurable and attainable than in retirement planning. Here's a list of retirement resolutions for 2008 to keep your game plan on track.
1. Save more. OK, let's put the toughest resolution right upfront: Every year, you face the unpleasant prospect of forgoing the double latte to try to save more money. Some 52 percent of U.S. households have less than $25,000 saved for retirement, including some that have saved nothing at all, according to a recent AARP survey.
It helps to set a retirement savings goal. But 61 percent of people do not know what percentage of preretirement income they will need to maintain their standard of living in retirement. You can do this calculation easily online at the AARP retirement calculator or ASEC Ballpark E$timate. Some 44 percent of the people who did a retirement calculation in the AARP survey changed their savings behavior as a result of doing so.
"If you don't have time to do the calculation, go with saving 15 percent of take-home pay over the course of your career," recommends Dan Houston, executive vice president of retirement and investor services for Principal Financial Group. Generally, that should replace 85 percent of your income in retirement.
As an added incentive, here's a peek at what other people your age have saved. For once, peer pressure might work in your favor.
2. Compare types of 401(k)'s. By now, I'm sure you're tired of hearing that you should stash enough cash in your 401(k) to get your employer's full match. But should you go with a traditional 401(k) or a Roth 401(k)?
To decide, you need to weigh your current tax rate against what you estimate your tax rate will be in the future. If your tax rate is currently higher than you think it will be in retirement, which is typical of baby boomers in their prime working years, you'll want to delay taxation by choosing a traditional 401(k) to get the tax breaks now. But if you're a young person or someone who expects to have a higher tax rate in retirement, it's better to incur tax immediately and save in a Roth 401(k).
Savvy savers can invest in both, along with IRAs and Roth IRAs, to diversify and hedge their bets against future tax increases.
3. Scrutinize your 401(k) for fees. The artful graphs on 401(k) statements may depict rising returns, but hidden fees could be eroding your nest egg more than they should. Some 83 percent of 401(k) participants don't know how much they are paying in fees and expenses on their 401(k) plans, according to the AARP.
The average 401(k) with $50,000 loses 1.2 percent of accrued income, or $599, per year to fees, but financial advisers say companies can administer 401(k)'s for as little as 0.5 percent, or $250, in fees. So ask your plan administrator how much of your retirement savings is going to fees.
4. Check for old 401(k) accounts. About 1 in 4 Americans has at least one defined-contribution account, such as a 401(k), with a former employer, according to a Fidelity Investments study. On average, those accounts have a balance of $64,000 and haven't been touched in seven years. Rolling that money over to an IRA or your current 401(k) plan, which is typically penalty free, gives you easier access to and control over your asset allocation, allows you to update beneficiaries, and gives you a great opportunity to make sure you are getting adequate returns on your investments and change them if you're not.
5. Explore second-career options. Many baby boomers are worried about having enough money to finance their retirement years. A quarter of workers in their 50s will want to stay on the job at least two years past the traditional retirement age for financial reasons, according to a survey of 400 employers by Boston College's Center for Retirement Research.
But that doesn't mean employers want older workers—who are often more experienced but also more expensive than their younger counterparts—to stay. The center found that employers are lukewarm about retaining even half of their older workers who want to keep working.
To explore future career options with companies that welcome older workers, you can check out this list of job websites specifically for the 50-plus set.
6. Discuss retirement with your spouse. When two people marry, they join their finances, too. Usually, both parties are better off financially, but it creates the need to talk about money and jointly decide how to budget for retirement. "It's very important to sit down and have an expectation exchange and to have a very frank discussion about money issues," says Nancy Schlossberg, a professor at the University of Maryland and author of Retire Smart, Retire Happy.
Nearly half of working adults say they are in agreement with their spouse or partner about saving for retirement, according to a Harris Interactive and Wall Street Journal survey, but almost one quarter of employed adults have never discussed retirement finances with their significant others. Creating a retirement game plan can get complicated when multiple marriages and children are involved. And women, because they tend to live longer, need to take extra precautions.
7. Plan for the financial transition. Learning to live on a limited fixed income for more years than planned is the most significant financial problem retirees will face, according to Dallas Salisbury, president and CEO of the Employee Benefit Research Institute. His advice: Sit down for a one-on-one financial planning session with a truly independent adviser. Here you can develop a plan to transition your savings out of your retirement accounts in the most economical way.
8. Write a will . If you die without a will, the state decides how your assets will be passed down, which may or may not agree with your wishes. Anyone who owns a home, has assets, or has minor children should write a will. But 57 percent of Americans don't have one, according to a recent Bankrate survey.
Creating a will can involve expensive visits to lawyers, but those with straightforward financial situations can make one on the cheap using books, downloadable financial software, or Web resources. As part of the process, you should also update the beneficiary forms on all your retirement accounts.
9. Stay healthy. Yes, everyone wants to look and feel healthy. But staying healthy can actually save you money and keep your retirement plan on track. All the usual advice about exercising, eating well, managing chronic conditions, and seeing your doctor for regular checkups applies.
But if you retire before you become eligible for Medicare at age 65, you need to think about healthcare. Only 29 percent of employers with 500 or more employees offered health benefits to early retirees in 2006, according to Mercer. Early retirees often must consider paying for continued coverage under COBRA, shopping for insurance on the open market, or getting a part-time job with benefits to bridge the gap.
Some scientists think that continuing to work, volunteering, or otherwise staying active and engaged can keep you healthier.
10. Pick out a place to retire. Adults planning to relocate after their working years are over typically are most interested in a retirement spot's overall cost of living (92 percent), climate (81 percent), cost of healthcare (76 percent), ease of transportation (69 percent), and proximity to friends and family (49 percent), according to a Longevity Alliance and Harris Interactive survey. And don't forget about libraries, Internet access, outdoor activities, museums, shopping, religious institutions, crime rates, sporting events, and cultural attractions.
Granted, most people don't relocate in retirement. Only about 6 percent of people over age 45 swapped places in 2005, according to the Census Bureau, and most of them stayed in the same state. But if you are going to take the plunge, be sure you like the location before relocating, as moving carries a considerable expense of its own.
You can enter the retirement criteria important to you to create a personalized list of Best Places to Retire at usnews.com/retiresearch.