“Personal Finance Insights: Saving for retirement - Abington Mariner” plus 1 more |
| Personal Finance Insights: Saving for retirement - Abington Mariner Posted: 08 Nov 2010 08:57 AM PST One of the biggest financial challenges most of us face is saving for retirement. How much you should save for retirement depends upon many factors, including some that are completely unknown in advance, such as your life span and the return that will be generated by your investments.
Your savings rate The earlier that you begin saving for retirement, the less you will need to save. By contributing to your retirement accounts as early in your career as possible, you allow time to work for you through the power of compounding. According to data published by The Vanguard Group, if your current income is $100,000 and you have not yet begun to save for retirement, you will need to save 13 percent of your income for 40 years in order to replace 75 percent of your pre-retirement income. If you have only 30 years to invest prior to retirement, you will need to save 21 percent of your income each year, and with only 20 years, you will need to save a staggering 36 percent of your annual income. Obviously, your contribution could be lower than these levels to meet your retirement needs if, for example:
The contribution rates above assume you receive Social Security retirement benefits, that your retirement lasts 25 years, and that your portfolio's asset allocation gradually becomes more conservative as you age. If your current income is greater than $100,000 annually, then you will need to save an even greater proportion of your income for retirement, whereas if you earn less than $100,000, you can save a lesser percentage. With these savings rates as a starting point, what accounts are available to save for your retirement? Below we outline a few options that may be available to you.
Employer-sponsored accounts Contributions to your employer-sponsored retirement account, when made on a pre-tax basis, have the benefit of lowering your taxable income (and thus your taxes), as well as assisting you in saving for your retirement. If your employer matches your contributions, contribute at least enough to receive your employer's match. You may contribute up to $16,500 per year via payroll deduction to an employer-based 401(k), 403(b), or 457 account. If you will be at least 50 years of age by Dec. 31 of the year of contribution, then you may contribute an additional $5,500, or a total of $22,000.
IRA accounts You may also contribute to an IRA. The contribution limit is $5,000 per tax year and contributions may be made until the tax filing deadline of April 15 of the following year. If you are at least 50 years old at any time during the tax year, you may contribute an additional $1,000. To qualify for a Roth IRA contribution, your modified adjusted gross income must be $105,000 or less as a single filer to make the full contribution ($107,000 in 2011) and $167,000 or less as a married individual, filing jointly ($169,000 in 2011). If your income level prevents you from funding a Roth IRA, you may still contribute to a traditional IRA. To contribute to a traditional IRA, you must be less than 70 1/2 years old. Depending on your income level and whether you or your spouse participates in an employer-sponsored retirement plan, your contribution may be tax deductible. Next month we will review how much you can reasonably spend during your retirement years so that you do not outlast your savings. Louis E. Conrad II is a Lexington resident and president of COMPASS Wealth Management, LLC in Lexington. He may be reached at 781- 862-7030 or info@compassinvest.com. This article is intended for general informational purposes only and may not be appropriate for your specific circumstances. Please consult with a qualified professional concerning your situation. This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
| New HS Program Teaches Personal Finance - NBC 29 News Posted: 08 Nov 2010 12:03 PM PST The recent economic gloom and doom has Virginia educators looking for ways to teach children good financial habits and for that, the state is turning to technology. Virginia high school students soon will be able to improve their financial literacy using state of the art software. It all stems from a unique partnership that is certainly not how children used to learn about money. Financial services company Genworth, which is based in Richmond, will fund the My Money, My Future program in Virginia high schools for the next three years. The program uses computer games, social media and other technology tools to educate teenagers about good financial habits. Supporters of the initiative say adults all too often assume kids will figure out those habits on their own. "A lot of times today I think what's happened is we take young people out of high school or out of college and throw them into the real world, they get hit with all these real world financial decisions that they have to make and they're just not prepared to make them," said Virginia Lieutenant Governor Bill Bolling (R). Right now the program is being used in about two dozen school divisions across Virginia including in Charlottesville, Nelson and Buckingham schools. Eventually it will expand to every school system in the state. Students who use the program rave about how the material is presented; the computer based applications, instead of in textbooks. They say that really helps drive the lessons home and they admit it makes what could be a very dull topic, actually interesting. This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
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