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You Can Still Fund Your 2013 Retirement Savings Plan

Even though 2013 is over, you can still make contributions to your Retirement Savings Plan through the deadline for filing 2013 Federal Income Tax Returns – April 15, 2014!

  • If you are under 50 years of age, you are allowed to contribute $5,500
  • If you are 50 or over, you are allowed the so-called “catch-up” additional $1,000 – making your maximum contribution $6,500

A contribution can be made to either a Roth IRA (invest after-tax money and withdraw tax-free later) or a Traditional IRA (invest before-tax money and pay taxes upon withdrawal later). I’m a big fan of the Roth IRA because it allows me to receive tax advantages on more dollars. I also believe that tax rates will continue to increase in the future so I would rather pay the taxes today.

Ways You Can Fund Your 2013 Retirement Savings Plan:

  1. Use your tax refund. Chances are pretty good that you would spend this on something that would decrease rapidly in value or have no value at all (vacation, vehicle, TV, computer, etc). Instead of making all of the money disappear, use a portion of it to fund your retirement!
  2. Use a bonus.  Many people receive quarterly bonuses. Use the March bonus to fund your 2013 Roth IRA.
  3. Sell something.  Sell the boat that sits in the yard, the motorcycle that never gets used, or the broken jewelry.
  4. Work overtime.  Work overtime for the next few months and place the majority of the extra income into your 2013 Roth IRA. Plus you will get the added benefit of paying extra Social Security payments so you will receive $3/month extra throughout retirement.

Contributions to individual retirement savings plans are subject to certain income guidelines. You must have earned income equivalent to at least the amount you contribute to your retirement account. Additionally, eligibility is reduced as one’s income increases. The IRS provides additional guidance HERE.

NOTE: This post was written as part of the “Retirement” series here at the wildly popular JosephSangl.com! Click HERE to access all previous tips in this series.

5 Reasons You Should Make Retirement Saving A Top Priority

Statistics routinely show that most people delay saving for retirement far too late. In fact, many do not begin saving until they are 10 or 15 years away from retirement!

Here are 5 key reasons you should make retirement savings a top priority:
  1. You will be tired. That’s why it’s called “retirement.” Seriously, you won’t have the same level of energy at 75 as you had at 35. And many people live far beyond 75 years of age!
  2. Compound interest. Compound interest helps you carry the financial burden. It is what allows an investment of $100 per month for 40 years to equal $1,176,477. However, TIME and CONSISTENCY matter most. That’s why it is so very important to start early and often!
  3. You won’t financially burden your children. You won’t believe the number of people I’ve met who are having to take care of their aging parents – not healthcare-wise, but financially! And as family, we all want to help however we can, but it is robbing many of these families of the ability to save for their own retirement. Many times, it leads to a repeat situation when the children retire!
  4. It’s a sign of wisdom. You KNOW you need to save for retirement. It seems like 20-percent of TV commercials are related to investing! To ignore the obvious is a sign of laziness. Using the slogan made famous by Nike: Just Do It!
  5. You just got 5 minutes older reading this article! Yesterday is gone. Tomorrow is the future. That’s why today is called The Present! Use the gift of TODAY to start your retirement savings account – or kick your existing one into a higher gear!

NOTE: This post was written as part of the “Retirement” series here at the wildly popular JosephSangl.com! Click HERE to access all previous tips in this series.

Most People’s Retirement Plan

I saw this recently:

A person shared with their banker, “I do have a diversified retirement plan: 30% hopes, 30% wishes, 40% prayers.”

The sad part is this is FACT for many people. It is my passion to help people in this situation CHANGE their financial future and to help them accomplish far more than they ever thought possible.

“Like” us on Facebook: I Was Broke. Now I’m Not.

Do I Have Enough Money To Retire?

“Do I have enough money to retire?”

This is one of the top questions I receive. It is usually asked by someone who is deciding when to retire, and they want to be financially prepared.

Let’s define retirement from the perspective of most people.

retirement date n. that moment when a person ceases to earn money and begins living on money from other sources – sources which include social security, pensions, retirement savings plans, and other investments.

Let’s back to the question – “Do I have enough money to retire?” The hidden message behind the question is, “I don’t want to run out of money and end up eating dog food to survive.”

Here’s the rough step-by-step calculation I use that can help you answer this question:

  1. Determine your monthly guaranteed income (social security, pensions, annuities, rental income, business income, etc.)
  2. Determine your monthly expenses (include savings for known upcoming non-monthly expenses like Christmas, vacation, car repairs, house repairs, annual insurance premiums, etc. Be sure to include even longer term expenses such as vehicle replacement and major appliance replacement.
  3. Subtract #2 from #1. This will determine your “monthly financial gap” (if one exists). If you have no gap, congratulations! You are in great financial shape. If there is a monthly financial gap, continue to step #4.
  4. Multiply the “monthly financial gap” by 300 – This is your “projected investments required” to provide enough income for the gap.
  5. Add up the total value of all of your investments – retirement savings plans, stocks, mutual funds, etc. and compare to the number calculated in step #4. If the total value of your investments meets or exceeds your “projected investments required,” you are in the financial position to retire!

Here’s an example:

Suppose Tom and Mary are preparing to retire. They are eligible for Social Security monthly payments of $2,875. They also have a small pension that will pay $300 per month. Their monthly expenses, including savings for short and long term known upcoming non-monthly expenses, are expected to be $4,500 per month. They have saved up $450,000 in their retirement savings plans – 401(k), 403(b), and Roth IRA.

Let’s use the steps to see how much they need to have saved to retire well.

  • Step 1  Monthly guaranteed income is $3,175
  • Step 2  Monthly expenses are $4,500
  • Step 3  Monthly Financial Gap is $1,325
  • Step 4  The “Monthly Financial Gap” is multiplied by 300 which provides a “Projected Investments Required” of $397,500
  • Step 5  Because they have have $450,000 in their RSPs, they appear to be in great shape!

A few notes:

  1. This is a rough calculation. I encourage any person who is preparing to retire to meet with a retirement specialist to walk through individual needs.
  2. It is appropriate to understand taxes to ensure that money is utilized in the most tax-efficient manner. Using the services of a retirement specialist and CPA can help with this.
  3. Ensure that appropriate insurance is in place. This includes consideration of long-term care insurance and life insurance policy analysis.
  4. This calculation essentially assumes a 4% nest-egg growth rate that provides necessary income and preserves capital.

Are You Receiving The Full 401(k) Match From Your Employer?

Here is a question that could literally be worth $1 million or more to you:

“Are you receiving the full 401(k) match from your employer?”

Or 403(b), Roth-401(k), Roth-403(b), 457, SIMPLE IRE, RRSP, TFSA, CPP, or TSP match?

Regardless of your company’s retirement plan, you should KNOW that you are receiving any and all of the company’s matching contribution! The sad fact is that many people have no idea about their company’s matching. As a result, they do not receive the FREE money the company willingly matches!

Let’s say you are 30 years old and are earning $40,000 per year and contributing 3% of your income to your company retirement plan. Your company matches your contribution “dollar-for-dollar (or 100%)” up to 6% of your pay. This would mean that you would be missing out on 3% of your salary in FREE MONEY that the company would match in your retirement account.

If you received pay raises of 2% each year, the total amount of matching contributions that you would miss out on receiving would add up to $67,338! If you consider a 10% growth rate on your investment, this $67,338 would actually be worth $529,231!!!

The decision to NOT contribute enough to obtain the full company match would be worth more than HALF OF A MILLION DOLLARS!

ACTION #1:Go to your Human Resources/Benefits coordinator RIGHT NOW and ensure you are contributing enough to receive the full company match!

ACTION #2: Tell ALL of your co-workers about it and help ensure they do the same!

ACTION #3: Get FIRED UP!

You may not remember my name 35 years from now, but you will definitely have more cash in your hand if you do this!

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ING: How Much Money Do You Need To Retire?

If you have read this website with any regularity, you will know that I am a freak about having a financial plan.  I want a written and very detailed plan for anything related to my finances.

One thing that I teach during live events is the importance of calculating how much money you need to retire.  It is also taught in my book, I Was Broke. Now I’m Not.

It is SO IMPORTANT to know how much money is needed to retire well.

How much money do you need to retire?

One of my favorite on-line banks, has created a terrific website to help you answer the question. I went to the website and calculated my number, and it FIRED ME UP!!!

I enjoyed the brief exercise so much that I want to CHALLENGE to everyone today to take five minutes to complete the following two tasks (trust me, it will be worth it):

  1. Calculate Your Number at INGYourNumber.com
  2. Calculate Your Number using the JosephSangl.com “Retirement Nest-Egg Required Calculator“.

Are YOU going to be able to retire well?

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Maximize Your 401(k) – Get The Full Match

If you have a retirement plan available to you at your workplace:

  • 401(k)
  • 403(b)
  • RRSP
  • TFSA
  • SIMPLE IRA
  • 457
  • TSP

AND your company provides matching funds – such as a “dollar-for-dollar up to 3-percent of pay” or “50 cents on the dollar up to 6-percent of pay” then

I BEG YOU TO DO THIS ONE THING …

Check with your employer to ensure you obtaining the absolute maximum amount of the company match.

It is FREE MONEY, and it is part of your compensation.

Go to Human Resources and ensure you are contributing enough to at least obtain the full company match!

QUESTION:  Would you share with me about your company match and whether you are receiving the full company match?

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Barring A Miracle

A reader recently shared a news article (written by Helen Kearney of Reuters) with me that highlights why I do what I do!

The title of the article is “Middle class falls short on retirement funds”.   Everyone should really read it.   It highlights the FINANCIAL DEBACLE that most Americans are steamrolling towards.

Here are some lines that stood out to me:

  • The average American has saved less than 7% of his desired retirement nest-egg.
  • Middle-class Americans think they need $300,000 to fund their retirement, but on average have only saved $20,000.
  • Barring a miracle … they’re going to be forced to dramatically cut back their lifestyles after retirement.
  • Respondents aged 50 to 59 have saved an average of only $29,000 for retirement.

The fact is that saving for retirement does NOT require a miracle!   It DOES require things like focus, determination, tremendous effort, and a relentless spirit.

Here are some key ways to make sure YOU are not one of the statistics!

  • Calculate how much you need for retirement (use my calculator HERE or use ING’s HERE)
  • Save SOMETHING every single time you receive money into your employer’s 401(k), 403(b), 457, or TSP.
  • If you don’t have an employer’s retirement plan, but have earned income – invest in a Roth IRA
  • I also like investing in real estate, land, small business, and other investments – always be on the lookout for these types of investment opportunities

The bottom line is this:   If you work for 30 years and have NOTHING to show for it, you have basically worked that entire period for FREE.   You earned money, but somehow it all left and went to other people.

You CAN do this!

Don’t have any idea how to get started?   My book, I Was Broke. Now I’m Not. tells you exactly how I broke free and started truly winning with money.   You can do it too!

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CNNMoney Article – How To Make Your Money Last

If you are many years from retirement, the article linked below may not seem very relevant to you.  It is.  Retirement will arrive faster than you think (ask anyone with white hair), and it is important to think about this stuff now.

It is worth the five minutes to read and process this great article – HERE.

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