We of ten hear the phrase “save for a rainy day”. While most of us think this is just a phrase and do not pay it much attention, for those who understand the value of sound retirement advice know how important it is to save for retirement. While most consumers are of the opinion that saving for retirement is something they would be interested in when they are past their mid 40s, it might be advisable to rethink that thought process.  Most financial planners and advisers who have seen their clients weather this terrible financial storm will strongly advice you to save for retirement and put in a place a sound retirement savings program.

Retirement And Savings

It may be interesting to look at some figures with regard to retirement savings to decipher whether we are in a bit of a

Put a Retirement Savings Plan in Place

spot. Experts are of the opinion that Gen Xers are probably going to be the worst affected as nearly 49% of Gen Xers will have to reduce their current lifestyles in retirement. On the other hand, baby boomers are in a better spot with studies showing that only 35% have had to downgrade their lifestyles for retirement and savings. It is more important for Gen X and Gen Y to consider their retirement savings options owing to the simple fact that the ’saving for retirement’ options such as company pensions, full social security benefits from early sixties  and 401(k) savings accounts are not available to Gen X and Gen Y. Hence it is very essential for the current generation to save for retirement and use unconventional channels apart from their mainstream options as mentioned.

Retirement Savings Account

The Bush government, in an attempt to enable consumers to be able to make after-tax contributions towards their retirement introduced a retirement savings account (3). This retirement savings account was meant to replace the traditional IRA, Roth IRA and Simple IRA accounts. Although this could be a tax haven and could help you save for retirement with tax free dollars, it is essential to keep the following points in mind to avoid any tax liabilities or implications:

• If your employer offers you a 401(K) retirement savings plan with a matching plan, make sure that you contribute enough to get the maximum amount as offered by your employer.

• In case you are switching jobs rollover your funds in the 401(k) account into an IRA account as this gives you more flexibility.

• Ensure that you nominate your children as beneficiaries for your IRA account. This will give your children tax- deferred and tax-free growth by allowing them to stretch the IRA payouts over their lives.

Retirement Savings Plan

The IRS (Internal Revenue Service) (1) has developed several programs to help individuals save for retirement. Some of the initiatives from the IRS are as follows:

• The IRS have expanded ways in which individuals and sponsors can automatically enrol into in retirement plans.
• By making the process of saving tax refunds easier and
• By helping individuals roll-over their lump-sum payments like payments for unused leave and other similar payments into various retirement plans.

In addition to this, with the help of the IRS, consumers can also receive their tax refunds in the form of government bonds, should they elect to do so. Moreover the IRS also provides information and advice on rolling over distributions received from unused vacation or employee termination and retirement lump-sum distributions.

Apart from these, there are several other savings plans available. It might be beneficial to consult your financial planner to get more personalised advice that is best suited to your retirement savings needs and objectives.

It is obvious from the abundance of options out there that it is possible to have a comfortable retirement. The only requirement is to have the drive and commitment to out the wheels in motions. Let us not forget that retirement savings are the need of every individual and it is never too late to start saving for retirement or to put a retirement savings plan in place.

References:

1. Retirement and Savings Initiative – Internal Revenue Service
2. Is there really a retirement savings crisis? – MSNBC
3. The President’s Savings Proposals – U.S. Department of the Treasury