Top 10 ways to prepare for retirement…new guidelines to financial security
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. Start by requesting
Savings Fitness: A Guide to Your Money
and 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
at 1.800.772.1213 for a free Social Security Statement and find out more
about your benefits at www.socialsecurity.gov.
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. For a free booklet about
protecting your pension, request
What You Should Know about Your
Retirement 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. For information on
simplified employment pensions, order Internal Revenue Service Publication
590 by calling 1.800.829.3676. Or you can view a copy on the
IRS Web site.
You may also want to request a copy of
Choosing a Retirement Plan for Your
Small Business.
Put Your Money Into An
Individual Retirement Account
You
can put up to $3,000 a year into an Individual Retirement Account (IRA) and
gain tax advantages. The chart below illustrates the way your account can
grow in an IRA.
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
advisor. 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.
Facts
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