Pre & Post Retirement Concerns

Making Enough to Save

If you don't have a high-paying job, you might feel left out of the savings game. No matter what you make, there's probably still enough left over to save for retirement. If you have access to a workplace retirement plan, make the largest contribution you can, especially if your employer matches it. Do your best to save on your own. Every little bit helps. Starting with nothing and saving just $100 a month at a 6-percent rate of return gets you $143,184 after 35 years.

Ahead of retirement, you might want to save every possible penny. While this makes sense, it might not be the most prudent choice, particularly if you have high-interest debt. You'll need to do what feels right for you, but consider these two schools of thought in tandem. On one hand, it appears counterproductive to save money that earns a lower interest rate than the rate you pay on your debt. On the flip side, you might want to save enough to take care of emergencies before you tackle the debt. If you become ill or lose your job, it would be nice to have three to six month's worth of expenses set aside to fall back on.

Taxes can put a ding in your retirement, even if you make all the right debt- and savings-related moves. When you access your nest egg, Uncle Sam might want a piece. You can use several approaches to keep as much as possible away from the IRS. For example, fund a Roth IRA ahead of and into retirement. While you contribute after-tax income to a Roth account, the IRS does not tax your withdrawals, including earnings, after you turn age 59½ and have held your account for at least five years. You can deduct traditional IRA contributions from your taxable income when you make them, however, come retirement all traditional IRA withdraws get reduced by regular income taxes. This could cramp your style in retirement.

It's bad enough to grow gray hair in your golden years, but running of out money might be a whole lot worse. Consider factors such as taxes and inflation when you determine how much to save heading into retirement. And while it's true that you should become a more conservative investor going into retirement, don't sell yourself short. Select investments, such as dividend-paying stocks, that provide an income stream you might be able to tap into as you attempt to make the most of retirement.