Investment savings is the final level of the savings pyramid. Its purpose is to help make sure you have enough money to support you until the end of your days, which could be 100 years of age or beyond. Investment savings supplement Social Security income and your deferred retirement plan (IRA, pension or 401K). All three of these income streams are important in your retirement years to ensure the standard of living you desire.
Jean Chatsky, author of You Don’t Have To Be Rich: Comfort, Happiness and Financial Security on Your Own Terms, states that one of the best tools available to help you find out how much you need to retire is free! The American Savings Education Council created this tool. Go to http://www.choosetosave.org/asec and click on “Ballpark Estimator.” This estimator provides you with a quick on-line tool that’s easy, simple and very informative.
Many of us boomers are late bloomers when it comes to putting money away for retirement. Starting late may simply mean you will need to play catch up to amass the wealth you need. You can do this, little by little, one step at a time. It doesn’t even have to be overwhelming. The important thing is that you just start!
The IRS even helps you out if you start late in saving for retirement. If you are over 50 years of age, the IRS allows you an annual contribution up to $20,000 instead of the regular $15,000 contribution in your employee tax deferred retirement plan. This is allowed through what the IRS calls a “catch up clause.”
Besides being able to contribute more to your employee tax deferred retirement plan, your employer usually matches a certain percent of your contribution. The employer contribution is free money and yours for the taking. All you need to do is fill out the paperwork and determine the amount to be taken tax deferred out of your paycheck every month, then sit back and watch your wealth grow! Only about 50% of Americans take advantage of a deferred retirement plan.
If you are an entrepreneur and own your business you are even in a better position! In 2006 you can place up to $44,000 in a self-employed 401K. This is more than double the amount you can contribute if you work for someone else. This is a major perk of being your own boss! If you saved $44,000 annually for 10 years with a 9% rate of return, you would amass $728,648 at the end of those ten years due to the beauty of compound interest.
Another way to free up cash in your retirement is to pay off your mortgage during your working years. Paying just one more mortgage payment every year towards principle can shave about 7 years off a 30- year mortgage. Just think how freeing this can be to know you, not the bank, actually own your home!
I’m sure you realize boomers are changing the face of retirement. You are probably one of them! Many women are embracing the second half of their lives by reinventing themselves, living their heart’s desire and turning their passion into their life’s work. When our work is our calling, we bring meaning and purpose to our lives while contributing to the lives of others too! If you love what you are doing, you may choose to work longer because you want to. Using 65 years of age as a marker for retirement is obsolete. If you work longer doing what you love, this, too, will help lengthen the life of your retirement savings.
Planning for your material existence in retirement affords you a level of security and safety. It allows you to sit back and take a deep breath knowing your survival needs are taken care of. Then you can get on with the business of having fun and enjoying life worry free!
