The Five Retirement Planning Resolutions You Should Have Made For 2011

Palm Coast retirement

While you might still be working on some New Year’s resolutions centered on shedding holiday weight gain, maybe you should have considered the following five resolutions to get on track with retirement planning.

Dull as it is to plan for something that may be 30 years in the future, save yourself the weight of regret by considering options now.

Resolution #1: Roth conversion

It is important to consider converting a traditional IRA into a Roth IRA during the next two years.

Although tax brackets will be static for the next two years because of President Obama’s extension of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, a Roth IRA can provide demonstrable tax advantages in the event that taxes are increased upon expiration of this bill.

Though contributions are subject to taxes immediately, those funds are free to grow until you make a tax-free withdrawal at age 59 ½.

Resolution #2: Contribute maximum to IRA

According to Reuters, research by Wells Fargo (NYSE: WFC) reported that middle class Americans aged 50 to 59 have saved $29,000 on average for retirement. A shockingly low statistic considering the same middle-class Americans speculate that $300,000 is necessary to support their lifestyles post-retirement. Contributing the maximum amount to an IRA is the easiest way to sock money away for retirement. Current contribution limits are set at $5,000 and $6,000 depending on age.

Resolution #3: Get out of gold

Gold, gold and more gold. Television investing personalities worshipped gold throughout the financial crisis when the markets were sinking considerably. While gold has certainly served its purpose, as equity markets have rebounded, the potential in gold pales in comparison to that of a diversified bond and equity portfolio. Take a glance at emerging markets, alternative energy companies and sectors that were hit particularly hard during the crisis for some ideas.

Resolution #4: Purchase that luxurious retirement condo. Maybe.

It is no news that the real estate sector was hit particularly hard during the recession. From 4th quarter 1999 to 1st quarter 2006, the home price index as compiled by to Federal Housing Finance Agency reported appreciation ranging from 6% to over 9.5%. Suddenly in 2007 and early 2008, home prices plummeted with an annualized 11.21% depreciation in 4th quarter 2008; no doubt a devastating blow for many families, but a perfect opportunity for others. Home prices are very depressed from pre-recession highs and if simultaneously used as an income property, it can be a profitable long-term investment until you decide to retire and live in the property full-time. However, for those struggling to pay bills as it is, taking on additional debt is probably not the best idea.

Resolution #5: Find a fee-based financial advisor

Finally, consider discussing your investments and the above ideas with a registered investment advisor. A fee-based firm can provide honest and constructive feedback regarding your individual investments and unlike advisors working on commission, they are not pressured to sell you investment products; just their knowledge and expertise. Meet with one to discuss your questions and concerns, and get set on the right track for 2011.

Gary Cassady

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