Phil's Personal Finance Tip of the
Day:
How to Retire Rich: 6 Smart Steps at Ages 50-66
Focus on the finish line. It's time to get serious about saving, and maybe cutting costs.
By Sandy Block and Jane Bennett Clark | Kiplinger – Tue, Oct 9, 2012 12:24 PM EDT
At this point, retirement isn't a far-off goal you'll worry about someday when you're ready for your second hip replacement. Unless you plan to work until you drop, retirement is staring you in the face.
That means it's time to get deadly serious about saving, especially if you haven't saved enough. And that's true for most people: Nearly a third of Americans age 55 and older have saved less than $10,000 for retirement, according to the Employee Benefit Research Institute. Only 22% have saved $250,000 or more.
With any luck, though, these are still your prime earning years, and some of your major expenses -- such as a down payment on a home and college tuition -- are behind you. "With our clients, the last ten years that they work is when they save the most money," says Mark Bass, a certified financial planner in Lubbock, Tex. To make sure you're on track, don't hesitate to seek help from a financial planner or use the many resources available on the Internet.
[More from Kiplinger: State-by-State Guide to Retiree Taxes]
Take advantage of catch-up contributions. Once you're 50 or over, you can contribute thousands more to your 401(k) plan than your younger colleagues. For 2012, you can contribute an additional $5,500 over the annual limit of $17,000, for a total of $22,500. Any employer contribution on top of that is gravy.
Don't stop there. You can also make a $1,000 catch-up contribution to an IRA, for a total contribution of $6,000 in 2012. Unlike with a traditional IRA, you don't have to take annual minimum withdrawals from a Roth once you turn 70 1/2. There are, however, income limits on Roth contributions. You're eligible if your modified adjusted gross income is less than $125,000 ($183,000 if you're married and file jointly).
Dare to downsize. You may have hoped to move to smaller digs as soon as the kids were grown (and the boomerangers departed). But some homeowners who have seen the value of their homes decline in recent years are reluctant to sell until the real estate market rebounds, says Michael J. Nicolini, a certified financial planner in Elkhart, Ind. Even if your home hasn't returned to its former value, moving to a smaller home could save you thousands of dollars a year in taxes, utility costs and insurance. That's money you can funnel into retirement savings.
To read the entire article from Sandy Block and Jane Bennett Clark | Kiplinger:
http://finance.yahoo.com/news/how-to-retire-rich--6-smart-steps-at-ages-50-66.html
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