Are You and Your Employees Saving Enough to Retire?
Do you have what it takes to reach your retirement goal? Is there enough time to save for the retirement you want? These are questions that should be asked of everyone – employees and employers, alike.
As someone who should be concerned about their retirement, you should realize there are several steps you can take to ensure you are investing enough in your future. Obviously, the first step is to start saving more money each year. The next step is to diversify your current portfolio to make it more efficient and enhance its potential to have higher long-term returns. To do this, you may want to determine your timeline until retirement, take a risk tolerance test, and create an efficient portfolio model. Put those strategies into place and then decide where the money should be invested.
Employees should always take advantage of the pre-tax retirement plan offered by their employer, and they should always recognize the importance of meeting their match. What does that mean to you? If your company offers any type of match, make an effort to beg, borrow and skimp to contribute whatever it takes to get the full match from your employer. Plain and simple, this is free money that would be wasted if the match isn’t met.
Once you meet the match, look at how much more you can afford to put away. A rule of thumb is to try to put aside at least 10-12% of your income with employee and employer contributions into your pretax retirement plan. If you do this for 15-30 years and invest the money properly, you have a very good chance to attain your retirement income goals.
One excellent option to consider for your retirement savings strategy is the Roth IRA. Since these plans became available last year, several company retirement plans have added the Roth as an option for contributions. Roth IRAs have limits for annual contributions – $4000 this year, unless you are over 50, and then you can contribute $5000. But after you reach the age of 59½ and your plan has been established for five years, your Roth IRA contributions allow for distributions to be taken tax free with no required minimum distributions.
The IRS rarely grants such tax-efficient boons as a Roth IRA. If you are young enough to take advantage of the long-term effects of the tax-deferred savings, then you should contact your financial advisor and set up a Roth IRA. Even if you think that you make too much to qualify under the IRS income limits for the Roth IRA, you still may be able to contribute to the Roth option in your company’s retirement plan.
With any retirement strategy, remember to save as much as you can, invest wisely, diversify your assets, and pick the most tax-efficient vehicle that you can find. Each of these steps will assist you in reaching your retirement income goals.
To access retirement planning resources, complete with calculators, asset allocation tools and risk tolerance questionnaires, click here.
Should you need further assistance with achieving your retirement goals, contact our Retirement & Financial Services division at 919-913-0235.
Questions or comments about this article? Email us at comments@hcwbenefits.com.
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March 16, 2007
Hill, Chesson & Woody strives to keep our clients' group decision makers abreast of trends influencing the employee benefits market. Look for Eyes on Benefits to bring you news and information affecting you and your employees.
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