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Blog Post: Save Now for Retirement

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Originally appeared in TransNews Spring 2017

Save Now for Retirement

Some 36 per­cent of American workers have less than $1,000 saved for their retirement and even worse, they have no financial plan to enhance that.

It’s well-known that Social Security payouts will not be able to cover retirement expenses (especially with the high cost of healthcare) and many multi-employer plans are in trouble or doing poorly. If a 401(k) plan is available to you, you need to take advantage of it and improve your chances for a more comfortable retirement. It’s never too late to take a hard look at your finances and devise a plan to start putting money away.

A 401(k) account will help you save on your tax bill while generating a nice little nest egg.  Just be careful not to invest all of those eggs in one basket. Today many plans offer target date funds which provide a mixed assets portfolio based on your age and the date you want to retire. In early years, your risk capacity will be higher. But as you near retirement age, it will become increasingly conservative and your exposure will gear more towards capital-preservation assets, such as government and index-linked bonds.

Making contributions to a 401(k) are easy through employee payroll deduction plans. You may also qualify for an IRS Saver’s Credit which rewards low and moderate income taxpayers who are working hard and need more help saving for retirement with a federal income tax credit on their tax return – just for investing for retirement through an IRA, 403(b), 457 and/or 401(k) plan (additional information can be found on the IRS website).

Your 401(k) contributions and investment gains will not be taxed until distributed. Meanwhile you’ll be earning compounding interest over time which allows small regular contributions to grow to significant retirement savings. And be aware that retirement assets can be carried from one employer to another.

Having a 401(k) plan warrants serious consideration and appropriate action. Seek the advice of a financial planner or call your provider for additional information. It could make all the difference to the health of your account and the quality of your lifestyle in the Golden Years.