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Cents and Sensibility Guy Steele |
Don’t become a statistic;
save for a comfortable
retirementIF you're like many people, you may not like participating in surveys, but you're curious about the results of those that contain illuminating information. For example, if you're concerned about saving for retirement, you may be interested in some of the findings from the Employee Benefit Research Institute's 2003 Retirement Confidence Survey:
Fewer than four in 10 workers say they have calculated how much money they will need to have saved by retirement.
Three in 10 workers say they have not saved for retirement.
About 33 percent of workers are not confident about having enough money to live comfortably throughout their retirement years.
Unless you're involved in making public policy, the overall impact of these statistics may have little impact on you.
But if any of these numbers are telling your story, then you've got something to think about.
What do you want to do when you retire? Travel around the world? Buy a vacation home? Open a small business? Whatever your goals are, you'll have a better chance of achieving them if you know how much they'll cost.
Until and unless you've done this, you won't know how much you need to save and what investment strategies can help produce those savings.
Don't be one of the four in 10 who haven't done the necessary "number crunching."
If you're one of the three in 10 workers who either haven't saved anything for retirement or just haven't saved enough to feel confident about your savings, you need to take action -- right away. But even if you're among the two-thirds of workers who have saved something and feel pretty good about what they've done, you can almost certainly benefit by boosting your retirement savings. Here are a few ideas for doing just that:
>> If you've got a 401(k) or other tax-advantaged retirement plan at work, put in as much as you can afford. If you're self-employed, open up a SEP-IRA or other suitable plan.
>> Each year, put in the maximum amount to your traditional or Roth IRA. For 2004, you can put in up to $3,000 to your IRA, or $3,500 if you're 50 or older.
>> If you've maxed out on your 401(k) and IRA, consider investing in a fixed annuity. Your earnings grow on a tax-deferred basis, and you can contribute virtually as much as you want. (However, be aware that withdrawals before age 59 1/2 may be subject to a 10 percent early withdrawal penalty and may also be subject to a contingent deferred sales charge.)
>> Invest for growth. The further you are away from retirement, the more you can afford to be aggressive. Still, your growth stocks will need to be part of a diversified portfolio that reflects your risk tolerance, your time horizon and your long-term goals.
By determining how much you'll need for retirement, and by increasing your savings and investments, you can greatly enhance your prospects for enjoying the type of retirement lifestyle you've envisioned. Plus, the next time you see a retirement confidence survey, you can relax.
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Guy Steele is a financial planner and head of the Pali Palms office of Edward Jones. Send planning and investing questions to him at 970 N. Kalaheo Ave., Suite C-210, Kailua, Hawaii, 96734, or call 254-0688