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NEWSLETTER ARCHIVE 

Bonita K. Bell, NW Mutual Financial Network

An estimated 28 million families headed by a worker under age 65 had no retirement savings accounts in 2001.  And, while the actual dollar amount of IRA contributions increased after new tax rules went into effect, it appears as if the actual number of taxpayers making contributions to an IRA is still declining, a trend dating back to 1997.
 
Despite the efforts of the government to help reverse this situation, two serious problems remain:

  1. Americans aren’t saving enough money to adequately fund their retirements.

  2. The Social Security system will have increased demands placed on it as baby boomers age.

 
Are you saving enough for retirement? You don’t want to be working at age 70 unless it’s by choice.  While some realize the importance of taking their retirement planning into their own hands, many continue to ignore the urgency of the matter.  Consider the following as you look towards the future.  
How and where to invest your money
It’s important to make sure your investments are as efficient and effective as possible.  Are you in a tax bracket that makes tax-free investments more attractive?  How do you get access to what you’ve saved without giving an unnecessary chunk of it to the government in taxes?  Make sure you know all the tax implications of distributions from different types of assets especially if you are under age 59½.
Your overall asset allocation
As a general rule, your money should be allocated among different types of investments and appropriate to your risk tolerance, time frame and investment objectives.  The closer you are to needing the cash, the fewer fluctuations you will probably want in the value of your portfolio.
Your asset needs are destined to change over time, so be sure to consider rebalancing your account periodically to better realign your financial future.  Remember, no investment strategy can guarantee a profit or protect against a loss.
 
Set aside as much as you can afford
Here are several tax rules that may help you maximize the amount you put away for your retirement:

  • Traditional and Roth IRAs – contribution limits (currently $4,000) increase to $5,000 in 2008 depending on your level of income.

  • 401(k)s and Similar Plans – eligible deferrals increase from $14,000 in 2005 to $15,000 in 2006.

  • SIMPLE IRA Plans – contribution limits of $10,000 as of 2005 ($12,000 if over 50).

  • “Catch-up” Provisions for those over 50- Generally, anyone over age 50 can make additional contributions to certain retirement programs over the usual limits. Consult with a financial professional in your area for details.

 
Tips for Preparing
IRAs appear likely to be the largest source of non-Social Security income in retirement for many in the next generation of retirees (baby boomers and beyond).  Don’t wait any longer to make this investment.  
The key to living the lifestyle you want in retirement is making the right decisions today.  Start 2006 on the right foot by meeting with a financial professional to help you jump start your future.
 
 [1] Journal of Pension Planning & Compliance “Retirement Savings and Household Wealth: A Summary of Recent Data”
 [1] Employee Benefit Research Institute Notes, August 2004, Vol. 25, No. 8 This decline may be due to the availability of Roth IRAs, which was not discernable at the time of printing.

Preparing for Retirement: Some "Get It" Some Still Don't