It’s time for that annual rite of passage into the New Year: making resolutions. In addition to vowing to lose 10 pounds or to get organized, perhaps 2012 should be the year to focus on finances. Regardless of age or financial status, here are some ideas that may help.
In the 20s
Those in their 20s who have school behind them and are fortunate enough to have landed jobs in this challenging job market are to be congratulated. Now it’s time to start preparing for the financial future.
Once there is a plan in place to repay student loans, perhaps the most important step for 2012 is to start creating a cash reserve for emergencies. Some experts recommend stashing away three to six months worth of living expenses to be able to stay afloat in the event of a job loss, accident or any other unforeseen situation that might affect financial security.
Keep cash reserves in liquid investments that will be readily available in case they’re needed. Consult a financial adviser for help locating investments that will hold cash reserves and are accessible in the current low interest rate environment.
30-somethings
With all the current demands for time and money, it’s hard for many people in their 30s to think about saving for retirement. An employer-sponsored plan such as a 401(k) or a 403(b) is an easy way to invest for the future. Those who aren’t doing so already should resolve to make 2012 the year to start maximizing contributions to company-sponsored retirement savings plans.
Those who can’t contribute the maximum right away should put in at least enough to qualify for any employer-matching contributions. Employer matches are essentially free money that can help participants take full advantage of the savings plans.
To get started, talk to human resources representatives or visit plan providers’ Web sites. Find out how much you are contributing and whether an employer match is available. Keep in mind that the 401(k) contribution limit is $17,000 in 2012 – up from $16,500 in 2011, according to the Internal Revenue Service 401(k) Resource Guide for plan participants.
Planning for the 40s
Those in their 40s have more at stake financially, making 2012 a good year to review life and disability insurance coverage to ensure that it reflects current realities and future goals. Ask how unexpected events might affect family goals and how dependents will be provided for if the income – or the earner – is gone.
Those who are overwhelmed by the prospect of making insurance decisions can enlist a financial adviser to help explore the big financial picture and determine what types and amounts of insurance make the most sense.
Finances for the 50s
People in their 50s who are feeling behind on retirement savings should resolve to take advantage of retirement plan catch-up contributions to help them feel more on track. Those who are 50 years and older can make special contributions beyond regular contribution limits to their qualified and nonqualified plans. In addition to the 401(k) contribution limit of $17,000, workers 50 and older can contribute an extra $5,500 to their qualified plan in 2012. Plus, they can make an additional $1,000 contribution to individual retirement accounts on top of the normal $5,000 limit. With retirement just around the corner, make 2012 the year to kick savings into high gear.
60 and beyond
For those who already are retired and enjoying the fruits of financial planning, it’s time to start thinking about legacies and estate planning.
Designing a legacy consistent with individual values is a personal and complex process, but it is well worth the effort. Set up a family estate planning meeting to open communication, prevent conflicts and let family members know what’s important. Then seek professional advice from an attorney, tax professional or financial adviser to put together an appropriate estate plan.
Before closing the book on 2011, take a look back at financial accomplishments, and think about desired changes for 2012. Financial pictures are ever-evolving. It’s never too late to make changes to help ensure many happy new years to come.
Paula Dougherty, CFP, ChFC, CLU, is a senior financial adviser with Dougherty & Associates, Ameriprise Financial Inc. in Springfield. She is licensed in Missouri, Arkansas, Kansas, California and Arizona, and may be reached at paula.j.dougherty@ampf.com.[[In-content Ad]]
