These strategies can help recover lost income and/or assets following one or more of the life events described above. These strategies can also be used by late savers to make up for lost time and to prepare for a comfortable retirement.

Increase Contributions to Tax-Deferred Retirement Savings Plans. The 2001 tax law increased annual contribution limits for IRAs and employer 401(k), 403(b), and Section 457 plans, at least through 2010. Just a 1% increase in the amount of pay diverted to savings can result in thousands of additional dollars at retirement. Americans contributed an average of $3,514 to 401(k) plans in 2001 (Opdyke and Higgins 2002). The maximum plan contribution limits are $12,000 in 2003, $13,000 in 2004, $14,000 in 2005, $15,000 in 2006, and higher amounts adjusted for inflation thereafter. (more…)

If a person with a 401(k) plan dies, the tax implications for the beneficiary depend on whether or not the beneficiary is a legal spouse. If the beneficiary is a legally married spouse, then he or she may roll over the total amount of the decedent’s account into an IRA with no tax implications except applicable estate taxes. No distribution must occur; the surviving spouse can maintain the funds in an IRA until April of the year following the year in which he or she turns 70 1/2—the age at which withdrawals from retirement accounts become mandatory. (more…)

In a free market system, income is a critical determinant in the quality of life one enjoys in retirement, including quality of care for those elders in need of caregiving. Those serving gay, lesbian, bisexual, and transgender elders need to take into account the impact of the unequal treatment same-sex couples experience under policies regulating retirement income. For example: (more…)

Retirement savings last longer when invested assets are withdrawn tax-efficiently. Generally, this means tapping taxable accounts or tax-exempt investments first, followed by retirement accounts made with after-tax dollars, and then accounts funded with before-tax dollars. Withdrawals from Roth IRAs contribution should be made last because they have no minimum withdrawal age and earnings grow tax-free. (more…)

Tax law changes also provide workers age 50 and older the opportunity to make additional “catch-up” contributions, above the maximum amounts listed above, to Roth and Traditional IRAs and to employer salary deferral plans. IRA catch-up contributions are $500 for 2003–2005 and $1,000 for 2006 and after. Catch-up contributions for employer plans are $2,000 in 2003, $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006, with amounts adjusted for inflation in 2007 and after. Older workers who take full advantage of the increased contribution limits and catch-up contributions will save significantly more than those who invest in taxable accounts or limit their contributions to pre-2002 tax law limits. (more…)

By some estimates, the personal savings rate in America has dropped to as low as 1 percent of income in recent years. This is down from approximately 8 percent in 1980, 5 percent in 1993, and 2.2 percent in 1999, and it is a frightening statistic. We save half as much as the Europeans and one-third as much as the Japanese. Not only is the trend bad in relative terms, in absolute terms, it means most people today will have to either work longer to achieve their retirement goals or sacrifice quality of life during retirement. Some will have to do both. (more…)

A defined benefit plan is the granddaddy of retirement plans. Unfortunately, in the years to come, these plans will likely become the retirement equivalent of a dinosaur. In a defined benefit plan, as noted earlier, an employee’s years of loyal service are rewarded with the continuation of income post retirement based on a predetermined formula defined by the company. These formulas vary from company to company, so if you’re covered by a defined benefit plan, be certain to ask your human resources department to provide you with the information you need to review your benefits. (more…)

So now you are planning your retirement thoroughly. You are sure that you still get your income to maintain your retirement lifestyle.

Here’s a rough breakdown of where your retirement income will likely come from when you retire: (more…)

Because in a defined benefit plan, the benefit relates directly to the number of years you work for a company, the longer you work there, the greater the benefit during retirement.

The cost of early retirement on your pension throughout the rest of your life is something to consider as you make a decision about when to retire. (more…)

It is hard fact that the best-designed 401k plan in the most prosperous investment condition can’t have an enough income for retirement, if the person is not contributing a significant amount to the plan regularly. This problem can be as result as no continuous access to 401k plan, financial instability to contribute due to low salary, other financial priority in life, family and life needs, (more…)