Thanks for voting!Guess what this week is? No, not National School Lunch Week – that was last week. It’s National Save for Retirement Week, Congress’ newly established effort dedicated to making you more aware, confident and active in planning for your financial future.
To mark this important week, We, The Savers is providing you with tips to get you on the right track for your retirement.
And note we said YOUR retirement. These days, it’s not always about rocking chairs and country club memberships. Retirement is your journey, your future and – hopefully - a nice chunk of your life. So let us help you get to where you want to go and join the dialogue on retirement planning.
Tip #1 – Figure out how much you should be saving.
Not an easy question for sure, but one you need to think about – especially since everyone’s idea of retirement is a little different. Do you want to live on a faraway island? RV around the country? All of the above? Or maybe take on a more modest retirement. Only with a goal in mind can you know how much to save for your days of leisure.
Then, check out Retire MyWay. In 5 minutes or so, you’ll have a pretty good idea of how much you should be saving each month, based in part on what you’re saving already and how conservative or aggressive you might be with your investments.
But you’re the one who knows where you want to be come retirement day. Tell us all about your goals. And how you plan to seize the day.
Tip # 2 – Get the most out of your employer’s retirement plan.
Are you contributing to your retirement plan at work? If you can, you should be. By participating in your employer’s retirement plan, you’re putting pre-tax dollars away before they ever hit your bank account. It’s one of the easiest ways to save for retirement. And as a bonus, most employers match at least some of your contributions. That’s free money! Not sure if you have this option at work? Ask human resources or your boss. If you do, make sure at the very least that you are taking full advantage of the match.
So, tell us. Do you have a retirement plan at work and if so, how much are you contributing and how much is the job matching? If you don’t have a retirement plan at work, you’re not sunk yet.
Tip # 3 – Find the IRA that’s right for you.
That’s I-R-A, as in “I wanna Retire Already.” Or “Individual Retirement Account” as it’s more commonly known. Either way, IRAs should be at the center of your retirement plan. They’re a great gift from Uncle Sam – an account where your savings can grow tax-deferred or tax-free.
There are two main types of IRAs: Traditional and Roth. The two differ primarily by when contributions are taxed. Traditional IRA contributions may be tax deductible, grow tax free and are not taxed until you withdraw the money in retirement. Roth IRA contributions are taxed before they go into an IRA, but then can be withdrawn tax-free when you retire. What’s the catch? Roth IRAs have income limits – so not everyone will qualify.
Still want more details? Compare the two and find out which one works better for you. Already know a thing or two about IRAs? Tell us which type is working best for you and whether or not it’s putting you on the inside track to reaching your retirement goals.
Tip #4 – 3 words: allocation, allocation, allocation.
OK, so you know how much to save, and you know what accounts to put it in. The next thing to think about? Asset allocation.
Sound complicated? Don’t worry. We just want to make sure you put your retirement assets into the right types of investments and savings vehicles, given your personal situation. If retirement is a long way off and you can stomach the ups and downs of the market, then you might be better suited with a larger percentage in equities. If you’re getting closer to retirement and want to avoid market swings, then bond funds or CDs might make more sense. Totally lost? Check out our Retire MyWay, an easy planning tool that will help you with asset allocation.
In the end, it’s a personal choice, but an important one. In fact, it can be just as important as putting money away in the first place. So don’t procrastinate, allocate! And as always, we want to hear from you about all things investments, asset allocations and the like. Are they playing a big role in getting you ready for the big “R” day?
Tip #5 – Remember to check in.
National Save for Retirement Week is coming to an end (awwwww). Fret not. Hopefully, you now feel a little more aware and in control of your retirement planning. Before we let you go, we have one last topic to cover. We call it “checking in.”
What, you thought you were done? Well, for now you are. But as a rule of thumb, it’s good to revisit your retirement situation about once a year - often enough to get back on course if your circumstances change, but not so frequently that you’re reacting to the economic crisis du jour.
Sound like a pain? One way to make “checking in” easier is to consolidate your financial life. Get your money out of those 401(k)’s from 3 jobs ago and roll them into your IRA. With all of your assets in one place, it’s easier to see where you stand, how you’re invested and if it’s time to make some adjustments.
So with that, let us wish you a happy, healthy and wealthy National Save for Retirement Week. Same goes for your actual retirement. Get planning! And keep us informed on how it’s going.
Tags: 401(k), Employer, IRA, Planning, Retirement
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why don’t you have any older baristers in your cafe?
Great comment Kristie. Glad to see you had something interesting to say about the article. You ever think it’s because older people don’t apply. Grow up and go away… or better yet, grow up and then go apply at one of the cafe’s.
No doubt saving is important. And, for those whose retirement funds have tanked or who want to have adventures while they are still in good health, RVing, as you mentioned, is an option. Living the full-time RV lifestyle is much less expensive than living in a stix-n-brix house or apartment. Plus you can work or volunteer as you travel, bringing in extra cash and/or reducing your expenses. Or you can even run a business as you travel. It is a lot easier to stay connected to the Internet now.
Hope to see you out there!
Jaimie Hall Bruzenak
author of Support Your RV Lifestyle! An Insider’s Guide to Working on the Road and Ing Account holder
For those of you who have a hard time giving up part of your paycheck to save for retirement, here’s what I did:
Find out what pay period your next raise hits. File an increase in 401k withholding for half of your raise, such that it hits your check at the same time the raise hits. Psychologically, you still get a raise, but so does your 401k. Using this method, I increased my contribution from 5% to 14% (my employer’s maximum allowed) over a period of five years. And it didn’t hurt a bit.
Remember that in order for this to work, both the raise and the increased contribution to your 401k have to hit on the same check.
I retired in 2001 with a $1600/ mo Pension. I had a small home, but it overwhelmed me so I sold it and moved to an apartment that was 1/2 of a 2 story duplex made of brick after 5 months I moved to the other 1/2 of the duplex, then an Aunt died and left me a fare sum of money, and I started geting my Social Security. Now I own the Duplex and the rent from my renter, Social Security and my Pension pay the mortgage which has 12 yr 7 months.
Question here… If your employer has a 401K plan, do you have to legally contribute to that first BEFORE opening up an individual IRA?
I ask b/c I got into a lunch room discussion about this with our company accounting team and they told me that the above might be true. My current employeer does NOT offer a match, so I don’t see any benefit to contributing to their plan other than convenience. My logic is to roll over my 401K from a previous employer into one individual IRA and just continue to contribute on my own. This seems much easier to me b/c there is no company match where I am and should I ever leave I won’t have to deal with yet another rollover to another plan. I just fear that I may be overlooking some benefits or pitfalls here since I’m not the most knowledable in this department.
I know I need to start saving again, but want to make the best choice. I thought about calling the IRS to ask, but was afraid their answers would confuse me even more!
Anyone have any insights on this?
I am 78 and still working. I have a substantial SEP account and good savings. I am still contributing as it helps with my income tax (contribution?). Should I be opening a roth account with this latest contribution. I did not opt at the time I could go Roth as I felt I was very close to a lower tax rate.
I did not see any mention of what you charge for maintaing an IRA account.. How about if one decided to move the IRA to another institution, what is the charge? Only with this knowledge can we make a comparison.
I’m a new recruit to this list. What’s the deal? Do ING counselors chime in when really good questions get asked (like NBtrue’s)?
What are the mid-50’s unemployed supposed to do? Die, now?
I been struggling with this issue, because I do not know if I will trust a bank, or any financial institution and than they will come up with the issue of they are in bankruptcy. I invest in some little stocks since ten years and I do not have nothing yet. So what is the point to put money for retirement if is not doing nothing? I think is more save under the mattress. Or what do I need really to do? I am all ready 57 years old, so I do not have to much time for save! Or do I?
I need all the tips I can get
So much to the chagrin of my mother, a former accountant, and my father, an attorney, I’ve decided to pursue the life of an actor. I don’t make a lot of money (about $20K annual) but I’m happy living the bohemian life. I know the importance of a retirement account and how it’s the best investment that you can make when you’re young. So my question is: is being a starving artist and having an IRA mutually exclusive?
I want to plan for my future but at the same time want to live the dream. While I’m sure my parents are hoping I wake up and smell the roses I’m determined to prove them wrong. So what is the minimum I should be putting away? Does ING have any minimum fee requirements? Any advice would be greatly appreciated.
Kristin-There is no need to contribute to an employer plan especially if they don’t match. The advantage of contributing is to defer taxes on the contribution. I like your idea to rollover a former 401(k) and contribute bi-monthly through an automatic debit to your own IRA.
I had a retirement plan with ING. 1/3 high risk. 1/3 medium risk and 1/3 Savings. When the market began to tank, I asked that all my investment money be put in the savings. I have NOT received any mail verifying my current account information. I don’t receive quarterly reports showing interest earned. I have tried to access Morningstar but couldn’t even get registered! What the heck is going on? I had over 17,000 dollars in there. When I call ING, they refer me to a seperate savings in my mom’s name. Thanks for letting me vent. Does anyone know how to access the correct website. I have the acct # but cannot see what my balance is. This is beyond frustrating.
If any representatives from ING Retirement Accounts reads this, I would appreciate a call or an email from you giving me the correct phone # for the retirement accounts.
Please email me to get my phone #.
Is anyone else experiencing this problem or provide a solution from personal experience.
Thanks for your feedback, Fnnclplan.
It’s really ashame how many of us in this country handle money and financial matters so poorly. We teach some of the most complex math subjects in our schools yet neglect teaching money managment. Regardless of one’s future occupation, everyone will need to manage, save and invest. It’s up to us as individuals to educate ourselves about money and how to manage it. If we don’t manage our own money someone else will.
I would recommend reading Dave Ramsey “Total Money Makeover”, Dan Solin “The Smartest (401k) Book You’ll Ever Read”, Dan Solin “The Smartest Retirement Book You’ll Ever Read”, and Stanley Danko “The Millionaire Next Door”. These are a few I found to be extremely helpful and enlightening.
Forums like this can be very helpful but be sure to read everything you can. You don’t have to be financially savvy to manage your money wisely. As Dave Ramsey says, “personal finance is 80 percent behavior and only 20 percent head knowledge”. Hoping you will have enough money to retire on won’t work. Remember hope is not a strategy.
Regarding “RVing” comments from Jaimie Hall Bruzenak, I am closing in on age 60 and have given some thought to doing just exactly that. I’m curious about the true cost of “RVing”…like the cost of a good RV with all the amenities, the fuel cost, the insurance, and last but certainly not least…the maintenance. It seems to me that the total cost would be just as much as living in a “stick and brick” residence. I know a lot of folks pay cash for the RV with equity in their homes when they sell however, I live in California and have lost over $75-$100,000 of equity due to the real estate markets having plummeted since 2005. I don’t see the market improving enough to recoup this loss by the time I actually reach full retirement age (age 66). Yes, I could purchase a previously owned RV for less money…I would be concerned about buying somebody elses problem (from a mechanical standpoint). If I was lucky it would only be a financial issue (i. e. dealership going out of business, consumer couldn’t afford the RV, or just somebody who thought they wanted to RV but found out it cost more than they thought).
Anyway, any thoughts or comments on my main question…What is the “true” cost? Thanks.
@Kristin, if you’re saving $5000 or less a year then an IRA is fine but if you can afford to save more, you should take advantage of your employer’s 401K - even without a match - as this will help you save more AND further reduce your taxable income. The max contibution to an IRA this year is $5000 but in a 401K you can deposit up to $16,500. Hope this helps! I am an ING saver and an Accredited Financial Counselor.
There is NO legal requirement that you have to contribute to your employer-sponsored 401(k) instead of (or before) contributing to an IRA. An IRA, in simple terms, is a private retirement fund and that is the biggest difference. It is only recommended that people contribute to a 401(K) because the benefits are usually better due to matching.
Another thing to think about are fees. As a teacher, a few times a year I see companies coming into the school who try to sell funds with 1.5% fees up above 2%. I give my advice to other teachers (find below 1%) and let them make up their own mind. Fees come in different ways if you think of putting money into rental properties. Taxes and upkeep of a rental house (mowing, snow shoveling, paint, etc.) are the same as management fees for a fund because it is money coming out of your pocket, so keep that in consideration. Not only that but the headaches of tenants which may give you a heart attack before enjoying retirement. Don’t forget the 7% realtor fee if you ever want to sell them. I’m at age 37 and I just had my wife and I increase what we put in for retirement because this is the time to do so, just like buying that first house. If you can, start or increase your investing. For those who have not lost jobs, this downturn is a gift. The economy will improve and be back. Why not get in when the market and the economy has been at its worse since 29′? Fight the fear. Understand the logic.
Michael Tomasetti - You can live the bohemian life as an actor and invest for retirement. on $20k per yr.
A good rule of thumb for investing is 10% of your income for your working years invested in diversified tax free investments. If you want a more precise answer you can use the retirement calculator on my website http://www.hbwcoach.com
I would be happy to help you use the calculator and to begin investing wisely too.
Jim Hahn - this is a great strategy for increasing your retirement contributions without noticing it. I often recommend it to my clients.
Elem Teacher - great points
Keeping costs low is wise. We want to be driven to find low costs and optimal results.
Now is a great time to be investing more, as almost everything is on sale, sometimes as low a 10 yr lows.
Kristin, I can’t believe your employer would tell you that you have to contribute to a 401k before you can open an IRA. It’s the benefit administrator’s job to know things like that. If that’s the kind of misinformation they’re handing out at your job, you should complain to your HR folks. Fnnclplan is correct, almost anyone is eligible to open an IRA. The only advantage to using a 401k might be that it allows you to invest in stocks, and earn a higher rate of return than an IRA at a bank, especially these days, with interest rates so low.
The thing about rental property is that you renters pay the mortgage for your appreciating property plus there are tax benefits. I only have one rental, a duplex, but put down $6000 and make $2,500 - $3,000 a year after expenses. You can’t beat that as an investment! It is not much trouble especially if you get good renters who stay. I recently paid the mortgage off. The bonus for retireees is: It is passive income, meaning it never counts against your social security benefit.
Kristin, altho’ others have commented on your question, I have additional points to make:
If you would ever need a loan, (and check w/your cracker-jack HR dept re: your company’s loan policy) you could take one on your 401k balance. With a regular IRA, there are no loans. With a Roth IRA, you can take out the contributions you have put it, but there are some rules to follow…Best to consult w/a tax accountant (always!)
Now, if you are married sometimes you might earn too much as a couple to contribute to a regular IRA, , esp if your spouse is already covered by a work-retirement plan, so your only/best option for tax-advantaged savings would be your 401k.
One thing to consider, too, (and I don’t remember where I read this) is that even if you don’t contribute to your 401k, but are eligible, your employer wlll checkmark the box on your W-2 that you are covered by a retirement plan. This could affect your ability to contribute to an IRA. Does anyone else have info on this point?
Just an appendum to Stacey’s comment to Kristin, which were very good, about the checkmark on your W-2…
A 401K is considered a “retirement plan” and even if you don’t participate, because of the opportunity to do so,
you are considered “covered”.
What this means is that you are prevented from making a tax-deductible IRA contribution, but you can still make
a after-tax IRA contribution or even a ROTH contibution if you meet the income limits. Just be sure not to mix
the two in the same IRA account, open a different one to keep them separate for tax purposes later.
Patti,
Rental properties can be great if things are done right. Sounds like you have a great situation. I know a lot of people who rent property and hear about horror stories. Good tennants are important. Buying a good property is important at a good price just like stocks. If you aren’t able to get renters then you are stuck with taxes and upkeep of the house. If you somehow need the money and a place is not rented then you are not in a great position. So I do agree rentals can be a great investment, just a lot of work and conditions have to be right. My brother bought a house to rent and had problems and headaches with renters. He eventually sold it with, I think, a small profit. He bought a cottage on a lake that he rents throughtout the year. His wife is laid off so she maintains the laundry and maintenance of the cottage to prepare for renters. They have had some stories to tell. The best renters they have had were older couples.
I was weighing the options on rolling over a portion (some older deductible IRAs) of my tax deferred assets to Roth in 2010. I know the income ceiling is unlimited in 2010 and the tax bite can be spresd over two years, my concern is if you can do this with some (but not all) of your IRA/401K funds.
Stacy, you are correct about the W-2. Also, if Kristen and/or her spouse exceed the AGI to contribute to a deductable IRA then a non-deductable traditional IRA is always available regardless of AGI or participating in a 401(k). Your idea for a contribution to a Roth IRA is almost always the best alternative. One warning about loans from a 401(k): You have to pay it back with after tax earnings. Obviously this means the money was taxed. Then when you withdraw it for another loan or retirement you get taxed again!
This is all great, but what if I want to bring an IRA from another institution to ING? How do I do that? I couldn’t find any information on this.
I currently contribute to an employer-matched 401K plan at work. However, they only match half of up to 6% of what I contribute. We used to have a 403b plan, but it was changed in 2007 to the 401K. What we had in the 403b was called ‘frozen’ at the time and is still sitting (what is left of it!) with another vendor–not the one that holds our current 401K. What is the best move to make with that money? Transfer it into an IRA or move it into the current 401K?
I am interested in a blog comment made related to deductible IRAs. Having lost 40% of my retirement savings I have maximized my 2009 IRA to $6000.00 as I am 63 years old.
Am I allowed to add another $6000.00 to my traditional IRA for 2009? If so, what will be taxable & when?
Am I allowed to buy a ROTH IRA fro 2009?
I have cash earning very little interest - looking for suggestions outside of stocks
Most books I read on retirement advise against putting my IRA Money into an adjustable Annuity.
Why is that..it seems that the charges for the annuity is no more than a broker’s and at the guaranteed
income is very attractive.
Patriko
MaryMA-It depends if you designated your contribution for 2008 before April 15, 2009 & were eligible. If not, then no -only one maximum contribution per year for all IRA’s together. Contributions cannot exceed the maximum for the year. Traditional IRA distributions will be taxed as ordinary income in the year you receive the money. CD’s are an alternative to stocks among other fixed income investments. For tax questions call 1-(800) 829-1040
Sherriejean-read your plans and/or call your plan administrator-HR dept. All depends upon what your plans say & if you are still employed by the same employer.
On November 1st I will file for Social Security. Same day I had planned to 31 years before, when I accepted what I thought would be the last job I would have. It was a great job, and one that I enjoyed doing for many years. It formed the basis of my retirement planning as this was (and still is) one of our countries icons of industry and innovation. Afterwards I worked for a time for another powerhouse of American innovation. While with both companies I interacted with many people all over the globe, bringing technological progress throughout the world. I am very grateful for the opportunities I have had and hope my children may have as well.
My financial plan: pay yourself first. Use IRA’s, ROTH IRA’s, company savings plans (401k’s, 403b’s, etc.) and even the new HSA plans many companies are making available to their employees as they institute those high deductible health plans as a way to reduce their employment costs. Diversification is key: there will be another Enron, just don’t be caught in it.
PS — Luckily, I was not an Enron employee.
@Kristin: You’re not obligated to contribute to your employer plan first. And you are correct that you can open an IRA and roll your old 401(k)s into that IRA, then contribute to the IRA on an ongoing basis. One advantage of an employer plan is that you’re able to contribute more annually ($16,500) vs. an IRA ($5,000). We hope this helps. Good luck.
@constance: It depends on when you plan to withdraw the funds. Any money in a Roth IRA must be kept in the account for at least 5 years before you’re able to withdraw it (without penalties, that is). When in doubt, speak to your tax advisor if you have one.
@Emily: Hi Emily: There are no account maintenance fees for ING DIRECT IRAs and no charge if you want to transfer your IRA savings or CD (at maturity) to another institution. But there is a $75 charge for transferring a ShareBuilder IRA to another institution.
@Jorge: You still have many years to make your money work for you. Try this nifty tool at http://www.ingdirect.com/retirement to help you map out a retirement plan.
@Heather: Here’s the deal, Heather: We like to think of ourselves as “Savings advocates” and do our best to answer great questions quickly and accurately. If you have a question, feel free to post it here or on our Facebook/Twitter pages. Welcome, new recruit!
Patti said,
Rental [i]is passive income, meaning it never counts against your social security benefit.[/i]
Really? SSA does not look at Sch. E? I thought they took AGI, which includes it. Any reference, link or back-up? Thanks
As ElemTeach put, “horrors” possible. Our 1st rental house in 1994 brought a lot of wonderful applicants, one of whom tried to sue us for housing discrimination.
Write down everything, take pictures, plan for the worst.
You can do many things yourself, but at least get a lawyer to make sure your lease is tight, follows state laws. Now on our 3rd house, past a 2nd frivolous lawsuit, 1 eviction, 1 good sale to a tenant … With a little luck, lots of hard work and patience, it can be worth it.
Now the question: Is rental real estate good to shelter retirement income? Anyone? Thanks again.
…sorry, stumbled on this board while beginning my search for investment shelter,
>ssa.gov > estimate your benefits > Questions > What income counts > Pub. 05-10069
http://www.socialsecurity.gov/pubs/10069.html
Right Patti, wages only
Thanks all, and Yeah for ING!
@Andrea
ING DIRECT offers retirement options like IRA Savings Accounts and CDs, as well investment options through ShareBuilder. But we don’t offer 401(k) plans. Sounds like your account may be with one of our ING affiliates. If you can’t access your account at ingdirect.com, try calling ING Life Insurance and Annuity Company (1-800-262-3862) or ReliaStar Life Insurance Company (1-877-884-5050). Hope this helps.
I did all the suggestions about money management, I had a house until I sold it and opened up an IRA and invested the proceeds. I had a 401K with my last job until the place closed and all employees were laid off. I am having difficulty finding even a bridge job until I can get back to my former work. I am 60 years of age, laid off worker, with no pension or retirement package nor severance pay. I am living off my 401K until its gone, then what do I do. I can’t apply for social security, and no one wants to hire a 60 year old, the job managers say I am overqualified for the job or they want someone who is internal to the company as their first hire.
When all is said and done I feel discriminated against and penalized for being fiancially savvy and hard working for over 38 yrs. NOW, WHAT DO I DO. HOW CAN I SAVE. AND I WILL BE TAXED BY STATE AND FEDERAL INCOME TAX FOR THE INVESTED INCOME I NOW RECEIVE…
@Anna: Just prayed for you, Anna. That’s discouraging. I hope you’re able to get a good job.
What if you already took the step and didn’t save anything?
Hi everyone. Interesting site.
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