Now that it’s the start of a fresh new year, I’m hoping you have a few financial resolutions ready to go. If you’re resolving to save more, you are not alone. “Save more money” is the top financial resolution for next year among those considering a resolution, according to the recently released Fidelity 2021 Financial Resolutions Study (tinyurl.com/y95r66t6).

I like that, but I’d like it even better if your resolution included what you wanted to do with the money you saved, along with a plan for the future.

In my world of portfolio management, I’d like you to “save more and invest the savings for the future.” The future might be preparing for retirement (my favorite goal for anyone who wants to retire someday).

If you’re not investing that savings, you might need it to pay off debt, a worthy goal (43% chose “pay down debt” as their top resolution in the Fidelity study). Or, you might want to consume the savings by purchasing something you would like to have: a TV, a new car or, when the time is right, a much-needed post-COVID-19 vacation.

No matter what your personal situation calls for, consider this: It’s not an all-or-nothing calculus. Your savings can have multiple goals. For example: 1/2 to retirement; 1/4 to paying off student loan debt; 1/4 for purchases. Of course, the figures will depend on your age and your circumstances, all the foundation of a personal financial plan.

Before going any further, let me ask you: How have you done with financial resolutions in the past? Did you stick to them? Did they cause you to start thinking differently about saving and investing for the future, and the importance of a big-picture financial plan? That would be the biggest benefit of putting a financial resolution in play.

When asked by Fidelity, 77% of those surveyed who worked with a financial professional said they were able to stick to their financial resolution in 2020, compared with 50% of those who did not have a financial professional.

That’s an interesting tidbit. I can definitely see the benefit of getting your financial professional on board to help you with saving and investing for retirement -- and creating a plan for the future.

It’s certainly worth a talk: “I’m saving for retirement this year. Help me set up a plan that will make it easy for me to not only automate the savings but also to invest wisely for the future.”

Finally, we all have to admit that this new year is different. COVID-19 will not disappear overnight, and in fact, COVID-19’s impact on the economy is the biggest financial worry for 46% of those surveyed. That’s well ahead of those who cited unexpected expenses (35%) or the rising cost of food and other day-to-day essential items (34%).

It can be tempting to skip resolutions altogether and wait out the virus.

I encourage you, however, to engage now.

Times may not be as bad as they may seem. A majority (72%) of those surveyed by Fidelity are confident they will be in a better financial position in 2021 than they were in 2020.

A financial resolution is the start of something good -- a move in the right direction toward a plan of action that can help a family survive and thrive in the best of times and the worst of times.

And, as always when planning is involved, there is no better time than now to get going on those goals.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

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The importance of having savings certainly has been brought to the forefront during the COVID-19 pandemic, as many people found themselves living on, and often exhausting, their emergency savings due to illness or job loss.

For example, a study released in September (tinyurl.com/y6k52dkm) by SimplyWise, a technology company that offers resources related to retirement and Social Security, found that 45% of workers who were furloughed or unemployed due to the pandemic could not last a month living off their savings, with 26% saying they could not make it two weeks.

So the question is: Does having even a small amount of savings, say $250, make a difference? The answer is yes, according to “Savings: A Little Can Make a Big Difference.”

The study, which focused on lower-income families, was recently published by the FINRA (Financial Industry Regulatory Authority) Investor Education Foundation and SaverLife, a nonprofit company that seeks to build financial security for working families.

According to the study, “People who were unable to maintain a savings balance above $250 were 71% more likely to have moved in the past five years for financial reasons versus people who were able to sustain a balance above $250.”

When the results were controlled for factors like household income, gender, age, education, marital status and the presence of dependents, those who were “unable to maintain a balance above $250 were still 29% more likely to have moved for financial reasons.”

To create the study, which can be found at tinyurl.com/ybhl596j, researchers reviewed the three-month average daily savings balances for 687 participating SaverLife members, then combined the data with survey information that looked at the members’ attitudes and behaviors when it came to finances.

Eighty-three percent of those surveyed who were unable to keep a savings balance of more than $100 were more likely to use “high-cost borrowing,” such as pawn shops, auto—title loans, refund advances and payday loans, when compared with those having savings above $100. Adding in the control factors, those who could not maintain the $100 balance were 39% more likely to use high-cost borrowing.

As might be expected, those who were able to maintain a savings of more than $100 were 61% more likely to say they were financially satisfied (29% when using the control factors) than those who were unable to maintain the $100 balance.

“[T]his new study underscores the need for innovative, low-barrier savings products that help financially struggling households build and maintain savings,” FINRA Foundation President Gerri Walsh said. “We now know that even a very modest savings cushion correlates with significant life improvements.”

One of the recommendations included in the study urged “all organizations to encourage saving money even in the smallest of increments. Many financial education programs equate adequate emergency savings with three months of living expenses. That guidance may work for some people, but isn’t always achievable for low-income households. This study suggests that even a very modest savings cushion correlates with major life improvements.”

Indeed, creating and maintaining a “savings cushion” is an important financial goal for the new year. Just a few hundred dollars can make a difference.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

This follows my column from last week about required minimum distributions (RMDs) returning in 2021 after a waiver in 2020.

If you are wondering whether you are making the right decisions about your retirement account withdrawals, it may help to know what other people do.

A recent survey of members of the American Association of Individual Investors (tinyurl.com/y4l7fbxu) can be a guide. The AAII is a nonprofit that helps individuals manage their assets through research, information and education programs.

Keep in mind that retirement account withdrawals are mandated by law after a certain age (70 1/2 if you were born in the first half of 1949 or earlier; 72 if you were born in the second half of 1949 or later). The amount of the withdrawal is determined by a formula that sets the minimum you must withdraw each year to avoid a hefty penalty -- a 50% excise tax on the amount that should have been withdrawn but was not.

It's interesting to note that when AAII survey respondents were asked about their withdrawal strategy, the most popular answer (45%) was to “simply take the minimum amount required by the tax code.” Two out of five respondents gave their reason for their current strategy as being “a desire to limit withdrawals to what government requires.”

That’s not a surprise, since taking more than the RMD, which is always an option, increases the amount that is reported to the IRS on your Form 1099-R as taxable income. There are some exceptions. For example, Roth IRAs do not trigger an income tax when you withdraw money (nor is the Roth IRA owner subject to RMD requirements for the Roth IRA).

Forty-one percent of survey respondents withdrew only their RMDs, no more. That could be a good strategy, as long as the retiree realizes that he or she should think twice before relying on the RMD to cover living expenses over the years.

If you look at how RMDs are calculated, you’ll understand that the goal of the RMD tables that drive withdrawal calculations is to deplete the IRA over time. That is, the older you are, the higher the percentage withdrawal.

When you are age 75, the RMD divisor is 22.9 (which translates into 4.4%). When you are age 85, the divisor is 14.8 (6.8%); at age 95, the divisor is 8.6 (11.6%); and at age 105, the divisor is 4.5 (22.2%). Again, the older you are, the higher the percentage withdrawal.

These divisors are set out in an IRS worksheet at tinyurl.com/nby6fxh, which applies to most people for calculating RMDs. (There is another worksheet that you would use if your spouse is your sole beneficiary of your IRA and he or she is more than 10 years younger than you.)

Let’s see what the divisors might mean to you in dollars.

Say your value on Dec. 31, 2020, is $1 million, and you are age 75. Your 2021 RMD will be $1 million divided by 22.9, or $43,668 (4.4% of $1 million).

To see the impact of the divisors over time, assume your IRA 1) does not grow and 2) is reduced each year by the previous year’s RMD.

At age 85, your withdrawal would be just over $39,000, based on your previous year’s value of $579,634. At age 95, your RMD would be about $27,000. At age 105, the RMD would be about $9,400. Again, this shows how RMD percentages work when the IRA has no growth -- it also shows you how important it is to invest your IRAs wisely in order to keep the IRAs from depleting over time.

When the AAII survey’s respondents were asked how confident they were about keeping a comfortable lifestyle for the rest of their retirement, 75% said they were “very confident,” and 15% said “somewhat confident.”

Confidence is good, but make sure it is bolstered by a strong RMD strategy.

Write to me if you’d like to discuss RMDs at readers@juliejason.com.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION