It’s not too late to start saving for retirement
Even 50-somethings can benefit
The earlier you start investing, the better.
Putting time on your side clearly gives your money a better chance to grow. So, what do you do if you're in your 30s and you haven't done much saving or investing? Are you already doomed to struggle during your retirement years?
Fortunately, the answer is "no." Even if you've done very little saving or investing, it's not too late to turn things around. In fact, even if you're in your 50s, you can take steps to dramatically improve your retirement outlook.
But let's first look at what a 30-something can do to start socking away retirement funds.
To begin with, look at your 401(k) or other retirement plan that you have at work. Are you "maxing out" on it? With tax-deferred earnings and pretax contributions, a 401(k) is a great vehicle to build retirement savings.
But it's still not enough by itself.
That's why you also should think about setting up a tax-deductible IRA or, if you qualify, a Roth IRA, whose earnings can grow tax-free.
There are other things you can do to play "catch-up." If you get an annual raise at work, consider putting the majority of it into savings.
After that, look for some "common sense" ways of saving money: take less expensive vacations, cut down on dinners out, etc. If you can convert these actions into just $20 per week in savings, you could amass $50,000 over 25 years, assuming you earned a modest 5 percent annual return.
Now, let's shift chronological years. If you're in your 50s and you haven't done much saving or investing, you're not alone. Nearly half of all U.S. workers age 55 or older have saved less than $150,000 for retirement, according to a survey completed by the American Savings Education Council.
If you're in this group, take heart: You can change the course of events. Just like your younger counterparts, you can load up your 401(k) contributions. And if you work for a nonprofit or government agency, your 403(b) or 457 plan allows you to contribute more than the annual maximum for a few years before retirement if you didn't max out in prior years.
Still, you can't just count on your retirement plan at work. You're also going to have to evaluate your investment portfolio.
If it's heavily weighted toward fixed-income vehicles, such as CDs, you won't achieve the growth you need.
To get that growth, you'll need to be much more aggressive.
At the same time, you don't need to take undue risks, because you can find plenty of high-quality growth stocks and mutual funds. And since you're only in your 50s, you still have time to put them to work.
As a late starter in the serious savings-and-investment arena, you also may have to forget any thoughts of taking an early retirement.
By working more years, you can earn more income and put more away in your company's retirement plan. And when you finally do retire, you'll be able to enjoy the fruits of your labors.
If you have not made your IRA contribution for the year 2000, you have until April 16, 2001, to do so.
Before making that $2,000 contribution, be sure to consult with your tax and financial advisers to help you make the best decision.
Jason Haney is an investment representative with Edward Jones.
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