HAVING an alternate plan for retirement is becoming the norm today. With the changes in retirement rules and the fact that employers are cutting back on what they contribute to their employees’ retirement, consumers now realize they must take more personal responsibility for their older-age finances. In this economy, how do you go about making sure you will have the finances needed for a secure retirement?
According to the US department of labor, fewer than half of all Americans have calculated how much they will need to save for retirement. While it’s important to plan, it’s also important to set realistic, achievable goals. Know your options and ask questions. Set aside time to talk with your employer about retirement plans. Your employer might offer benefits like 401k plans that allow for an immediate tax-deduction growth on your savings.
While earlier generations of retirees relied on employer-provided pensions, today’s workers will need to rely on their own work-related and personal savings for retirement. People are also living longer now and will require more from a retirement plan than ever before. That’s why it’s extremely important to have an alternate plan and save as much as possible.
Houston Better Business Bureau and USDOL both recommend that consumers consider the following to ensure a more financially comfortable retirement:
A penny earned is a penny saved. Start saving now and continue to stick to your savings goal – it’s never too late to start saving. Make a budget and use it! Saving can be fun if you think big and realize how much it will pay off when the times comes to retire.
Be realistic about retirement needs. According to USDOL, experts estimate that you will need about 70 per cent of your preretirement income – 90 per cent or more for lower-wage earners – to maintain your standard of living when you stop working. The average retiree is in retirement for 20 years of their life. Plan ahead and familiarize yourself with how much you will need after factoring in social security and other sources of retirement income.
Take advantage of employer savings plans. While more and more companies are becoming less generous with retirement benefits, some still allow you to contribute to a 401k retirement savings plan. If it’s offered, participate. There might even be a chance that your employer matches a percentage of your contribution.
If your employer doesn’t offer a savings plan, consider investing in a traditional individual retirement account or a Roth IRA. You can put up to $5,000 a year into an IRA and even more if you are 50 or older.
Don’t stir the pot. Avoid touching your retirement savings if at all possible. If you withdraw your savings before retirement, you’ll lose principal and interest and you might lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan or roll it into an IRA or your new employer’s plan.
Jordan Rzad is the senior director responsible for internet marketing at Houston Better Business Bureau.