Work with your financial advisor to determine if you are on track to save enough to ensure a financially secured retirement. If not, your financial advisor can help you to identify and implement measures to improve your financial status and get you on track. Steps that can be taken include the following:

Cutting Back on Expenses
This may not seem like much at first; but consider that by saving an extra $50 per week, you would have an extra $27,000 after ten years assuming only a 1% rate of return. If the amount is added to an account in which you already have savings, the rate of return could be higher. If you are planning retirement for you and your spouse, you may be able to add even more to your savings.
Increasing Savings to Your Retirement Accounts
Because you are 50 (or older), you are eligible to add an additional $1,000 to your IRAs, bringing your total contribution for the year to $6,000.

If you participate in a 401(k), 403(b) or governmental 457(b) plan, you can contribute an additional $5,500 if that is allowed under the plan. This would bring you total contribution for the year to $22,500.

Discuss your saving options with your tax professional so that he or she can help you to determine how much you can afford to add to your savings. In some cases, you may be able to offset the cost of contributing to your retirement account by taking a tax deduction for contributions or making contributions on a pre-tax basis, and claiming the non-refundable savers credit. For instance, consider the following example of an individual who earns $4,000 every month. Assume that her tax filing status is married filing jointly. If she saves $400 from each paycheck on a pre-tax basis, her income tax would be reduced by about $85, which means that the $400 would cost her only $315.

Current (for 2012)

Alternative (for 2012)

Gross pay for one pay period



Federal income tax



State and local income taxes



Social Security and Medicare taxes



Voluntary retirement plan contributions



Mandatory retirement plan contributions



Other pre-tax reductions



Other after-tax reductions



Take-home pay



Net cost (reduction in paycheck)



Calculator used:
Of course, the actual cost will vary among individuals, as it is determined by their tax rate and income amount. In addition to the tax savings, she would be eligible for a saver's credit of about $400. For an explanation of the rules regarding the saver's credit, see the article Saver's Tax Credit: A Retirement Savings Incentive.

While this example shows someone who adds amounts to a pre-tax retirement savings account, you may have the option of adding your contribution amounts to a Roth account, where the account is funded with after-tax amounts (amounts that have already been taxed). Unlike pre-tax funded accounts where earnings grow tax deferred but are tax when distributed, distributions from a Roth account can be tax-free. If you are faced with the option of choosing between making your contribution to a traditional and a Roth retirement savings account, the following are some points to be considered:

  • The saver's credit also applies to Roth savings account, and should therefore not be a determining factor when choosing between both types of accounts.

  • If your contribution is being made to an IRA, you are eligible to fund a Roth IRA only if your modified adjusted gross income (MAGI) does not exceed certain amounts.

  • Deductions are not available for contributions made to Roth IRAs.

  • Beginning the year in which you reach age 70 .5, you will need to start taking required minimum distributions from your retirement account, unless the account is a Roth IRA. This required minimum distribution limits your flexibility with determining when you want to make withdrawals.

  • Distributions from Roth accounts are tax-free if certain requirements have been met. This can be helpful if you need to make a withdrawal and prefer not to increase your taxable income for the year.
There are other factors that should be considered, such as the amount of income tax that would be paid under each option. Your financial or tax professional should be able to assist you by providing reasonable determination for which would result in the least amount of income tax paid.

Don't Save Too Much
Individuals who are behind with their retirement savings might risk contributing more than they can afford in an attempt to play "catch-up." However, when considering how much more you can add to your savings for your retirement nest egg, it is important to ensure that you
do not save more than you can afford as doing so can negatively impact your savings. You might be saving too much if you find that you are adding amounts to your savings account, while having no option but to use credit cards and other means of debt to cover your living expenses.

Reassess Your Investment Portfolio
The rate of return on your savings and investments plays a critical role in how much you will have accumulated by the time you are ready to retire. Investing in only low-risk assets helps to ensure that your capital is protected, but can mean insufficient returns on your investments. On the other hand, investing in high-risk assets comes with the promise of higher returns, but is accompanied with the risk of losing your capital and previous earnings. Consider working with your investment professional to strike a balance where possible. For more on investments, including the different types available see The Complete Guide To Retirement Planning For 20-Somethings: Choosing And Managing Your Investments.

The following are just a few of the articles that we have available that can help you to learn about how investments work, and the ways in which you can effectively manage your investments.

If you are still unable to retire by your desired retirement age, you have the option of deferring your planned retirement age, or you may consider a working retirement. Working past your desired retirement age can provide several benefits. In addition to providing additional financial resources to cover your living expenses, you might be eligible for employer-provided medical and dental benefits, which could help to reduce your out of pocket costs for such items. Bear in mind that some employers do not provide such benefits for individuals who have passed a certain age, as defined in their policies and procedures. Accordingly, if you have the option of choosing between two or more jobs, the employee benefits provided by each employer should be a determining factor when making your choice.

Next: The Complete Guide To Retirement Planning For 50-Somethings: Medical Expenses »

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