Treasurer Markell Encourages Delawareans To Begin Saving For Their Retirement During National Save For Retirement Week
In connection with National Save for Retirement Week, State Treasurer Jack Markell encourages Delawareans to use this week as a starting point to either begin or enhance their preparations for retirement.
"Delawareans feel squeezed by so many things - energy prices, college tuitions, and health care, to name a few - many decide to put off saving for retirement," State Treasurer Jack Markell said. "Since retirement won't always be ten, fifteen or twenty years in the future, it's important to begin saving now."
According to the Employee Benefit Research Institute's 2005 Retirement Confidence Survey, 51 percent of workers age 55 and older have saved less than $50,000 for retirement, not including the value of a primary residence, and 39 percent of workers in the same age group have saved less than $25,000 for retirement. A separate survey by Thrivent Financial estimates that one in five pre-retirees age 50 to age 64 have accumulated less than $5,000 for retirement.
"The most important thing to remember is not to delay in planning and saving," Mr. Markell said. "It doesn't get any easier, so it's best to start today."
The Office of the State Treasurer's Tomorrow's Money website offers the following tips developed by the Bond Market Foundation to assist Delawareans to prepare for their financial futures. It's always best to consult with a professional financial advisor.
- Pay yourself first. No matter what your income level, setting aside even a little money each week adds up to big savings. Stashing away the equivalent of just an extra $60 per month into your retirement plan will boost your savings by more than $150,000 over 40 years if your investments earn 7% annually.
- Write it down. Keep a strict record of your budgeted and actual expenses for one month. Write down everything. Then at the end of the month review your list. Categorize your spending and you'll begin to see where you could cut back. You might be surprised by how much you can begin to save once you really know where your money is going.
- Direct deposit to savings. Sure, we all say that we want to save money. But when it comes right down to it, it's hard to make the choice to save instead of spend. That's where having direct deposit comes in handy. You can have your bank withdraw a pre-set amount of money each paycheck and deposit it directly into an account of your choice. So if it's hard to make that decision on your own, by opening a savings account or IRA (individual retirement account), and having even a very small amount deposited from your paycheck on a regular basis you're beginning to create a solid savings fund that you can use to invest later.
- Maximize your options. Check to see if your company offers an employer-sponsored retirement plan - like a 401 (k), 457 or 403 (b) plan When you sign up to participate, your employer will automatically deduct a certain amount of money (determined by you) from your regular paycheck and funnel it to this retirement plan (often you are able to choose which fund or funds the money is invested in.) The four biggest benefits to employer-sponsored retirement plans are:
- the company does all the legwork for you;
- it's an automatic payroll deduction so it forces you to save;
- most companies will match a certain percentage of their employees' contributions, and
- at least a portion of your contribution will be "pretax" so it will help lower your tax burden at the end of the year.
- Sign up, even if it's just contributing the minimum amount.
- Open an IRA. By opening up an individual retirement account (IRA) through a local bank, credit union or brokerage fund, you can contribute up to $4,000 a year (up to $5,000 if you are age 50 or older) into this account which, for many people, is tax deductible. So you save in two ways - you're putting money away toward your retirement, and you'll pay less in taxes at the end of the year.
- Catch up. Catch-up provisions in 2001's Economic Growth and Tax Reconciliation Act make it possible for workers who are age 50 and older to literally "catch-up" on their savings by allowing them to put away additional funds into their employer-sponsored plans or an IRA. The "Age-50" catch up provision allows workers to make an additional contribution of $5,000 to the standard $15,500 amount allowed in employer-sponsored plans, for a total maximum contribution of $20,500. Employees age 50 and older can also invest a catch-up amount of $1,000 to the $4,000 already allowed for an IRA for a maximum contribution of $5,000.
- Learn more. Attend a free educational course offered by the Delaware Money School. Courses such as "Retirement Reality Check," "Retirement Investing 101," and "Planning a Secure Retirement" are presented in a no-hassle environment by financial professionals across the state. Visit www.delawaremoneyschool.com or call 877/307-6858 for a course schedule.
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