For many investors, the end of the year can be a good time to catch one's breath and look ahead to next year. Take the time to take stock of your investments, evaluating what worked, what didn’t, and what you might do better next year. Here are four key opportunities to consider that may recharge and reset your finances as you enter the new year.
Review and Refresh Your Financial Plan
If you set goals for the past year, evaluate your progress. Did you spend more than expected? Save less than expected? Or did you manage your goals easily—suggesting a bigger challenge may be appropriate for next year?
While setting financial goals for next year, you might also consider the long-term. When do you plan to retire? What do you need to see before getting there—a specific number in your 401(k), a paid-off balance sheet, or something else? Should you stay in your home or downsize? The answers to these questions may help you formulate a more solid plan.
Assess Your Retirement Readiness
Are you on schedule to retire? Are you contributing enough to your 401(k) or IRA?
Though the answers to those questions depend on each person's circumstances, some patterns are emerging in savings habits among those in their 20s, 30s, 40s, 50s, and beyond. Check these numbers complied in a 2024 Vanguard report, to see whether you are on track.
Under 25
Average 401(k) balance of $7,351
Age 25 to 34
Average 401(k) balance of $37,557
Age 35 to 44
Average 401(k) balance of $91,281
Age 45 to 54
Average 401(k) balance of $168,646
Age 55 to 64
Average 401(k) balance of $244,750
Age 65 and up
Average 401(k) balance of $272,588
These numbers are simply averages—they do not account for income, sector, or cost of living. They also do not include assets in individual retirement accounts (IRAs), taxable accounts, or other savings accounts. But knowing what those in your general age bracket save, on average, might give you a better idea of your progress toward retirement savings.
You should notice that as workers grow older, they tend to contribute a greater percentage of their total income to retirement.
Pay Down High-Interest Debts
Paying down your high-interest debts first is a beneficial strategy many people use to put a dent in the debt they own.
Calculate Your Cash Reserves
It is a good idea to have some cash held for emergencies during turbulent times. From an unexpected medical bill to a new appliance, having cash on hand may help avoid the stress of paying for sudden expenses. Assessing your cash reserves at the beginning of the new year may give you a good baseline for setting cash accumulation goals.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking #633210
Footnotes:
Average 401(k) Balance by Age: Are You on Track for Retirement? (businessinsider.com)
2 What Rising Interest Rates Mean For You, CNN,
https://www.cnn.com/2022/09/21/success/what-rising-interest-rates-mean-credit-mortgage/index.html
