12/30/2011 2:31 PM ET|
12 retirement resolutions for '12
The new year is a good time to review and adjust your retirement plan, and some changes this year can help you boost your savings.
Some new developments could help you save more for retirement in 2012, including a higher 401k contribution limit and better access to 401k fee information. Of course, your ability to save and invest will largely determine your retirement success.
If you're aiming to improve your finances in the new year, try to incorporate a few of these tips into your retirement plan. Here are 12 ways to get better prepared for retirement in 2012.
Save $500 more next year. Consider resetting the automatic contribution to your 401k to include an extra $42 per month. The contribution limit for 401k's, 403b's and the federal government's Thrift Savings Plan will increase by $500 in 2012, to $17,000. And workers 50 and older will be able to contribute an extra $5,500 next year.
"Always allocate a percentage to your retirement account from your paycheck before you spend, even if it is a tiny amount," says Elaine King, a certified financial planner and the managing director of wealth planning at Lubitz Financial Group in Miami. "It is the discipline that counts."
Get a 401k match. If you're unable to completely max out your 401k, at least aim to save enough to capture any 401k contribution match your employer offers. For example, if you earn $50,000 and your company offers a match equal to 3% of your pay, your nest egg could get an extra $1,500 boost.
Maximize tax breaks for retirement saving. A variety of tax breaks are available to retirement savers. You can defer taxes on up to $17,000 in a 401k and $5,000 in an IRA in 2012. Those limits jump to $22,500 in a 401k and $6,000 in an IRA if you are 50 or older. Low-income savers whose modified adjusted gross income is less than $28,750 for singles, $43,125 for heads of household and $57,500 for married couples may be able to claim the Saver's Credit, which is worth up to $1,000 for singles and $2,000 for couples.
Put some of your savings in a Roth. Consider allocating some of your retirement savings to a Roth 401k or Roth IRA account, especially if you're young or in a low tax bracket. While you won't get an immediate tax break, Roth accounts give you easier access to your money before retirement and more withdrawal flexibility in retirement. The $100,000 income limit for converting a traditional 401k or IRA to a Roth was eliminated in 2010, which means almost anyone can allocate some retirement savings to a Roth account in 2012.
Scrutinize 401k fees. Those with 401k's will have access to more information about the costs and fees deducted from their accounts, thanks to a 2010 Labor Department regulation that goes into effect in 2012. Pay close attention to mailings from your 401k plan next year, and use this information to minimize the fees you pay.
"You'll be receiving a new type of quarterly account statement from your plan sponsor that details the actual dollar amounts charged against your account and mutual fund choices," says Mark Miller, a Reuters retirement columnist and the author of "The Hard Times Guide to Retirement Security."
"The easiest way to determine if you're paying too much is by making an apples-to-apples comparison between a passive index fund in your plan -- say, an S&P 500 fund -- with the same fund offered elsewhere," Miller continues. "If your plan's fund charges 75 basis points but you could buy the same thing in an IRA for seven basis points, ask your employer why -- nicely." (Will your 401k provide enough for retirement? Find out with MSN Money's 401k calculator.)
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The 12 essentials of retirement?
1.) stock up on beans and other food items
2.) extra stack of firewood
3.) patch the leaky roof and replace the broken window
4.) a little exercise to keep the doctor away
5.) properly dispose of all the junk mail with the credit card applications
6.) keep out of debt and don't let the bankers con you into a loan.
7.) look over the list of political candidates and pick out the least worst of the bunch .. and don't forget to vote.
8.) remember your age and don't get to thinking your 21 again.
9.) if your married, hug your sweet heart extra tight .. and if your not married kind, a little peace and quiet has its advantages too.
10.) remember gold, money and about everything else is what some other fool thinks it is worth.
11.) keep up on the news because most of the time it is funnier that the comics if the keystone cops of politics have anything to do with it.
12.) and most important .. Every day is a good day, some are just better than others .. as long as your name isn't in the obituary column.
Joe, what you don't understand is that the government killed defined benefit plans. You comment that companies took them away, but that is simply not true. The government has it stacked so that when a company has money that they could put into the defined benefit plan, because the economy is doing well and they are making plenty of money, they are not allowed to contribute. When the economy is in the toilet, as it has been for the last few years, and they have little or nothing in the way of profits, they are required to borrow tons of money to fund their defined benefit plan. Then they have to pay interest payments on the borrowed money which leaves them even worse off than they were before the government forced them to contribute.
The rules surrounding defined benefit pension plans have become so screwed up by congress, that most companies cannot afford it anymore. Specifically the big companies. Smaller companies can do it, but those are going to be the sole proprietorships or the small partnerships with a few owners and very few employees to have to fund for. Doctor's offices, lawyer's offices, etc... Everyone else is basically going to be out of luck because of the messed up funding requirements.
To add insult to injury, the fed dropping rates so low is really reducing the lump sum payout for everyone whose plan allows for the election of a cash payment. Even worse off are the folks whose benefit is small enough that under the current rules their lump sum is so small they are forced out of the plan by the IRS regulations.
The best advice for everyone out there is what Doug said. Stay out of debt and don't spend all of your money thinking that the government will take care of you.
OUR MAIN NEW YEAR'S RESOLUTION TO SAVE MONEY IS TO EAT OUT LESS. IT'S AMAZING HOW JUST PICKING UP A PIZZA OR GOING OUT FOR A QUICK LUNCH 3 OR 4 TIMES A WEEK CAN ADD UP SO QUICKLY. DO THIS OVER A PERIOD OF A MONTH AND YOU'VE SPENT HUNDREDS OF DOLLARS.
A FEW YEARS AGO I WAS STOPPING AT McDONALDS 2-3 TIMES A DAY TO PICK UP A LARGE COFFEE TO HAVE WHILE I WAS AT MY DESK. AND USUALLY WORKED 7 DAYS A WEEK.
ONE DAY I FIGURED OUT I WAS SPENDING OVER $700.00 A YEAR JUST ON COFFEE ????????
IT SEEMS LIKE YOU JUST GET INTO THESE EVERYDAY HABITS WITHOUT MUCH THOUGHT.
SO, FOR 2012 WE'VE DECIDED TO MAKE A CONCERTED EFFORT TO CUT BACK ON OUR EATING OUT AND INVEST THE EXTRA MONEY WE WOULD HAVE SPENT IN A QUALITY, HIGH PAYING DIVIDEND STOCKS.
we've had essentially 0% interest the past 10 years. likelihood of near 0% the next 5 years. assuming you only put away 10% of your salary into the magic 401K plan, that means you stashed 10% of what you NEED for 15 years. where's the other 90% going to come from?
The 401K is very poor.Years ago companies had pensions.Employees didn't contribute.
At retirement time would get A nice pension and social security.Life was good.
Today with the 401K,the company might match ya maybe 2%.Wow thats really huge.
Even maxing out the Roth ever year,you'll have A hard time making it with social security.
Probably will need A part time job to make ends meet.Fantastic way to retire.
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