Starting Your Financial Year Right

Some financial firms such as T.Rowe Price and Charles Schwab now offer low-cost investment advice for about $250. Learn from their advisors' retirement-saving tips for 2005:

Save more
Ideally, save at least 15% of your annual gross income, especially if stock-market gains continue to be modest, says T. Rowe Price's Christine Fahlund, CFP. If you earn $50,000 a year, for example, contribute 6% ($3,000) to your 401(k) and authorize your bank to make automatic contributions of $57 a week to an IRA (another 6% or nearly $3,000). If your employer contributes 50 cents to your 401(k), for each $1 you save you will reach 15%.

Rebalance often
Even if you have a smart mix of mutual funds in your retirement portfolio, the assets in them may no longer match your desired allocation, says Fahlund. Call the financial firm and ask if your funds can be rebalanced automatically at least once a year.

Set a goal
Your totaly retirement savings by age 65 should be 25 times your expected first-year spending needs, says Schwab's Rande Spiegelman, CPA, CFP. So, if you think you'll need $20,000 during your first retirement year, shoot for a nest egg of $500,000. Don't panic if the sum seems intimidating. "Social Security and the sale of your home may contribute to that retirement goal," he says.

Pay attention
To stay on course, track your portfolio. Jot down your funds' returns each quarter or use personal finance software to do so, says Spiegelman. "It's also probably time to find out how to view your accounts online."

From Reader's Digest - January 2005

 

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• New Tax Rules for 2005
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• Streamline Your Financial Life
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“ Use your knuckle to rub your eyes. It's less likely to be contaminated with viruses than your fingertip. ”

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