October 21 through 27 is National Save for Retirement Week, established by Congress to remind Americans of the importance of – you guessed it – saving for retirement. So why not mark the occasion by considering ways in which you can boost your own financial resources for those years in which you’re officially a “retiree”?
If you’re somewhat concerned about your financial prospects during retirement, you’re not alone. Check out a few of the findings from the Employee Benefit Research Institute’s 2012 Retirement Confidence Survey:
Just 14 percent of workers are very confident they will have enough money to live comfortably in retirement.
Sixty percent of workers report that the total value of their household’s savings and investment, excluding the value of their primary home and any defined benefit plans, is less than $25,000.
More than half of workers report that they and/or their spouse have not tried to calculate how much money they will need to live comfortably in retirement.
In these challenging economic times, it can be challenging to pay your living expenses and still have money left over to save for retirement. But you can take some steps to help your cause. Here are a few to consider:
Pay yourself first. Every time you get paid, move some money – even if it’s only a small amount – from your checking or savings account into an investment. Make it easier on yourself by having your bank move the money automatically.
Boost your 401(k) contributions. Whenever you salary goes up, increase your 401(k) contributions. Your money can grow on a tax-deferred basis, which means it can accumulate faster than if it were placed in an investment on which you paid taxes every year.
“Max out” on your IRA. Even if you have a 401(k), you’re probably still eligible to contribute to an IRA – and you should. A traditional IRA can grow tax deferred, while a Roth IRA’s earnings are tax-free, provided you’ve had your account at least five years and you don’t start taking withdrawals until you’re at least 59½. For 2012, you can contribute up to $5,000 to your IRA, or $6,000 if you’re 50 or older.
Control your debts. It’s never easy, but try to reduce your debts as much as possible. The less money you need to devote to debt payments, the more you can add to your investments.
Build an emergency fund. Try to build an emergency fund containing six to 12 months’ worth of living expenses, kept in a liquid account. This fund can help you avoid dipping into your retirement accounts to help pay for unexpected costs, such as a big doctor’s bill, a new furnace or a costly car repairs.
Create a retirement income strategy. It’s important to project your living expenses during retirement. Then, once you have at least a good estimate, you can create a long-term strategy – involving your investments, retirement accounts, Social Security benefits and all other financial resources – to help you achieve the retirement income you will need. To calculate these figures and develop such a strategy, you may want to work with a financial advisor.
National Save for Retirement Week will come and go quickly. But your retirement could last for decades — so do everything you can to prepare yourself.