Investment Resolutions For The New Year

Even if you think you have saved a lot and increased your retirement funds this year

, you will be better off if you improve your savings and investment strategies for the New Year with a few investment resolutions. These will be especially helpful if you are one of many workers in the country who is not confident enough with your nest egg and its ability to last you throughout your golden years.

If you are already making the most of your 401K, think about opening a Roth retirement account. You can pay taxes on a part of your savings beforehand with this type of savings vehicle. A Roth account will strengthen your financial planning and nest egg as you will not have to pay taxes on your balance again, as long as you do not take withdrawals for a five-year minimum until you reach the age of 59 1/2 years. This option is viable for seniors who are currently from a lower tax bracket if they expect to be included in a higher bracket when they make their account withdrawals in the future. These accounts also afford you added financial flexibility when you retire as they do not come with the required minimum distributions that traditional accounts have.

You should avoid penalties when it comes to your retirement accounts to ensure that most of your account balance is protected, which in turn gives you larger distributions. For example, taking IRA distributions before you reach 59 1/2 years of age or 401K benefits before you reach 55 will result in a 10% penalty for early withdrawal, aside from ordinary income tax on what you have withdrawn. After reaching 70 1/2 years of age, you will also need to take the required minimum distributions from your traditional retirement accounts; otherwise, you will face a much stiffer 50% penalty aside from regular income taxes on the distributed amount.

Streamline your investment strategy by using investments that costs less. Of course, you should not sacrifice potential investment growth with low costs, but strike a happy medium. For example, examine the expense ratios of the mutual funds your retirement account(s) invest in. If you find another fund at a lower cost, this will boost your returns. Theoretically and on average, mutual funds that cost less will perform better than more costly mutual funds.

Investing well means that you should make the most out of what you already have, or use additional tools to help you create and preserve wealth for retirement. Opening a Roth account, avoiding retirement account penalties, and using lower-cost investments are just a few investment resolutions you can implement in the New Year for a more comfortable retirement in the future.

by: Katherine Smith

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