Winsett: It's never too late to save for retirement

Winsett: It's never too late to save for retirement

July 22nd, 2011 by By Jim Winsett in Business Diary

Q: Everyone seems to have advice on retirement. What advice does the BBB offer in this arena?

A: Good question, and regardless of age, retirement planning cannot start too soon. Having an alternate plan for retirement is becoming the norm today. With the changes in retirement rules and the fact that employees are cutting back on what they contribute to an employee's retirement, consumers now realize they must take more personal responsibility for their retirement finances.

In this economy, how do you go about making sure you will have the finances needed for a secure retirement?

According to the U.S. Department of Labor, fewer than half of all Americans have calculated how much they will need to save for retirement. While it's important to plan, it is also important to set realistic, achievable goals. Know your options and ask questions. Set aside time to talk with your

employer about retirement plans. Your employer may offer benefits like 401(k) plans which allow for an immediate tax deduction growth on your savings.

Where earlier generations of retirees relied on employer-provided pensions, today's workers will need to rely on their own work-related and personal savings for retirement. That is why it's extremely important to have an alternate plan and save as much as possible.

BBB and the Labor Department recommend that consumers consider the following to ensure a more financially comfortable retirement:

1. A penny earned is a penny saved. Start saving now and continue to stick to your savings goal. It is never too late to start saving. Make a budget and use it. Saving can be fun if you think big and realize how much it will pay off when the times comes to retire.

2. Be realistic about your retirement needs. According to the Labor Department, experts estimate that you will need about 70 percent of your pre-retirement income -- lower earners, 90 percent or more -- to maintain your standard of living when you stop working.

The average retiree is in retirement for 20 years of their life. Plan ahead and familiarize yourself with how much you will need after factoring in Social Security and other sources of retirement income.

3. Take advantage of your employer's retirement savings plans. While more and more companies are becoming less generous with retirement benefits, some still allow you to contribute to a 401(k) plan. If it is offered, participate. There may even be a chance that your employer matches a percentage of your contribution. If your employer does not offer a plan, consider investing in a traditional IRA or Roth IRA.

You can put up to $5,000 a year into an individual retirement account; you can also contribute even more if you are 50 or older. If you are self employed, there are several options you may consider. Consult with your accountant and financial planner.

4. Do not stir the pot. Avoid touching your retirement savings. If you withdraw your retirement savings now, you will lose principal and interest and you may lose tax benefits, or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer's plan.

Get answers to your questions each Friday from Jim Winsett, president and CEO of the Better Business Bureau Inc., which serves Southeast Tennessee and Northwest Georgia. Submit questions to his attention by writing to Business Editor Dave Flessner, Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at dflessner@