Retirement Links
Make Retirement
Saving a Goal
2006 Personal Savings
Fall to 74-Yr. Low
Investing Your
Way to Wealth |
PAY OFF
DEBT
This might seem counter-productive, but it’s difficult to save for
retirement when you’re paying more in interest on credit card debt
than you earn on your retirement investments. Unless you can come up
with a plan that allows you to reduce your debt and save for
retirement at the same time, it typically makes sense to pay off
your credit card debt first. You need to be aggressive – if you only
pay the minimum payment due, it could take many years before your
debt is fully paid off.
SPEND LESS THAN YOU EARN
This is a key strategy for generating funds to put aside for
retirement. Set a goal for cutting your monthly expenses by 10 or
15% a month and earmark that money for retirement savings.
CONTRIBUTE TO YOUR EMPLOYER-SPONSORED RETIREMENT PLAN
If your employer offers a 401(k) plan, make contributing as much as
possible a top priority. Contributions to a 401(k) are made with
pre-tax money and grow tax-deferred, which means you’ll reduce your
tax liability while building your retirement fund. As an added
bonus, many employers match a portion of your contribution, which
makes your retirement fund grow even faster.
For 2007, the maximum you can contribute to a 401(k) is $15,500. If
you’re age 50 or older, you can contribute an extra $500 under the
law’s “catch-up” provision.
PAY YOURSELF FIRST
If your company doesn’t offer a retirement plan, you should open a
traditional or Roth IRA. Workers who are eligible to establish
traditional or Roth IRAs may contribute up to $4,000 for 2007
($5,000 for individuals age 50 and older).
Instead of waiting until next April 15 to write a check for your IRA
contribution, arrange to have up to $333 per month deposited
directly to your IRA ($416 per month if you’re eligible for the
“catch-up” provision). Automatic deductions are an easy way to make
the maximum contribution, since you’re less likely to miss money you
don’t see.Brought
to you by the North Carolina Association of Certified Public
Accountants in cooperation with the AICPA.
©2007 The American Institute of Certified Public Accountants |
