4 reasons retirement savings may thrive in 2012

January 11, 2012

| MoneyRates.com Senior Financial Analyst, CFA

If you are behind on your retirement savings, you can point to many excuses. The problem is, those excuses don't really matter. Retirement saving doesn't depend on other people's judgment of whether you did a good job; it is a dollars-and-cents matter of whether you will have the money you need when you are too old to keep working.

In other words, only a no-excuses approach to retirement saving will work. In that spirit, here are four reasons why you can make 2012 the year you improve your savings habits:

  1. Online information empowers shoppers. The Internet helps people research products and compare prices, and even provides them with coupons and deal information. New smartphone applications can even put all that power in your hands right when you are in a store. The key is to use these shopping tools to get better bargains on the things you need, rather than letting them become an inducement to spend more.
  2. A slow-moving stock market makes bargains easier to catch. U.S. stocks did virtually nothing in 2011 -- for all the dramatic swings along the way, they ended the year pretty much where they began it. That's no help for investors looking backward, but looking forward, it makes this a good time to set up your portfolio. Trying to invest in a free-falling market is treacherous -- you may suffer devastating losses before it hits bottom. On the other hand, investing in a roaring bull market is also risky -- it increases the chance that you will overpay for stocks. After a slow year for the stock market, like last year, you can still find reasonable stock prices and calmly set up your portfolio to take advantage of them.
  3. Recent trends point to better times ahead. Recent economic indicators show growth improving and inflation easing, though these changes have been subtle rather than dramatic. Would it be too much to ask for 2012 to be a year when stocks rose, savings account interest rates climbed higher, and inflation took less of a bite? After so many years when all these factors have worked against investors, it is possible they could all align in the right direction looking forward.
  4. You may have to make up for lost time. Losing money in adverse markets is bad enough, but what's even worse for retirement savers is losing time. Whether you were late to start saving for retirement, have suffered investment setbacks, or some combination of the two, you need to start making up for lost time. The longer you wait, the more time you lose.

Past generations have earned respect for the adversities they survived: the Great Depression, World War II, and so on. There's no doubt that current generations of adults have been handed a difficult set of financial circumstances. However, it is how they handle that adversity that will determine their legacy -- not to mention their retirement lifestyles.

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