Top 10 Ways to Prepare for Retirement
October 11, 2009 – 1:19 am
Prepare for Retirement
Sign up for your employer’s retirement savings plan. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.
Know Your Retirement Needs
Retirement is expensive. Experts estimate that you’ll need about 70 percent of your preretirement income lower earners, 90 percent or more to maintain your standard of living when you stop working. Take charge of your financial future.
Find Out About Your Social Security Benefits
Social Security pays the average retiree about 40 percent of preretirement earnings. Call the Social Security Administration and find out more about your benefits.
Learn About Your Employer’s Pension Or Profit Sharing Plan
If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment. Find out if you will be entitled to benefits from your spouse’s plan.
Contribute To A Tax-Sheltered Savings Plan
If your employer offers a tax-sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.
Ask Your Employer To Start A Plan
If your employer doesn’t offer a retirement plan, suggest that it start one. Simplified plans can be set up by certain employers.
Put Your Money Into An Individual Retirement Account
You can put up to $4,000 a year into an Individual Retirement Account (IRA) and gain tax advantages.
When you open an IRA, you have two options a traditional IRA or the newer Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, you should know that the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose.
Don’t Touch Your Savings
Don’t dip into your retirement savings. You’ll lose principal and interest, and you may lose tax benefits. If you change jobs, roll over your savings directly into an IRA or your new employer’s retirement plan.
Start Now, Set Goals, And Stick To Them
Start early. The sooner you start saving, the more time your money has to grow. Put time on your side. Make retirement savings a high priority. Devise a plan, stick to it, and set goals for yourself. Remember, it’s never too early or too late to start saving. So start now, whatever your age!
Consider Basic Investment Principles
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.
Ask Questions
These tips point you in the right direction. But you’ll need more information. Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure the answers make sense to you. Get practical advice and act now.
Financial security doesn’t just happen. It takes planning and commitment and, yes, money.
For more information visit the United States Department of Labor website.
Photo: Quint Cobb Foreclosure Relief
4 Responses to “Top 10 Ways to Prepare for Retirement”
Hi, Rita – nice post… I wanted to point out that your figures for IRA limits are a little old. For 2009 you can contribute up to $5,000 to an IRA (subject to income limits) plus an additional $1,000 if you’re age 50 or older. These limits apply to either type of IRA – the traditional or the Roth IRA. Limits have not been set for tax year 2010 yet, but are not expected to change from the 2009 limits.
Keep up the good work!
jb
By Jim Blankenship, CFP®, EA on Oct 11, 2009
Thanks Jim for keeping us updated!
By rita morgan on Oct 11, 2009
Hi Rita, just wanted to say that you always have GREAT idea’s and I love reading your blog. I wanted to add somthing if you don’t mind, for those thinking about retirement. There is such a thing as “retirement coaching”, in case anyone is faced with that burning question “what am I going to do once I retire?”. I hear from so many people who get to retirement and think “YAY!…I get to retire” then once they get there is different than they thought – visiting friends and sleeping in can only last so long. If you or anyone you know is unsure what they would like to do in their retirement time, a retirement coach can really help! Anyway, Rita, thanks again for such great idea’s regarding retirement!
By Jeanne on Oct 23, 2009
Thank you Jeanne for your nice comments. I know people who didn’t know how to deal with retirement although they had hobbies they enjoyed. Our job is such a big part of our identity that there is a sense of loss when we no longer have it. I think a coach would be helpful in those cases.
By rita morgan on Oct 23, 2009