4 questions to get and keep you on track with retirement

July 18, 2007 at 8:47 am Leave a comment

If you can’t answer yes to these 4 questions, you’ve got some work cut out for you.

Are you maxing out your 401(k)?
A 401(k) offers the most ‘bang for your buck’ when it comes to retirement. The maximum annual contribution is $15,500 ($20,500 if you’re over 50 years old) and that’s not including the match your employer may offer. Your earnings are tax-free until you withdraw the money. And, the best part is that the money is transferred directly from your paycheck so you’re not tempted to spend it.

Are you keeping tabs on your progress?
There are a number of folks that take advantage of the 401(k), but fail to monitor the account. You should review your funds at least once a year to see if you need to make any changes or delay retirement.

Not sure if you’re on track? Use a financial calculator to see what you need to do.

Are you grabbing every tax break you can?
401(k)s are great retirement tools, but there are additional options to help you maximize your retirement savings. If you qualify, consider using traditional and/or Roth IRAs to build wealth. You should be able to set aside up to $4,000 this year and $5,000 in 2008. The best part about the Roth IRA, because it’s funded with after-tax dollars, is that it grows free of taxes. Withdrawals are also exempt of taxes.

Have you created a safety net?
Saving only for retirement is a bad plan. Surprises happen over the course of your life, and if you’re only savings is in retirement accounts, you’ll end up tapping those funds. Be prepared by having life insurance, disability insurance and savings of up to 3 months of living expenses. This will keep your retirement funds intact while covering what life throws your way.

Consider a term life policy. It maximizes your death benefit for smaller premiums. Coverage should be 5 to 10 times your income (salary). In terms of disability insurance, find a policy that pays 60% of your salary. If you’re employer offers it, take it. It’ll be much cheaper through an employer than individually.

Source: CNNmoney

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Entry filed under: Insurance, Retirement, Saving and Investing.

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