You have contributed to Social Security your entire life, and now you wonder if it will be there for you when you are ready to retire. None of us have that answer, but there are ways to help ensure you maximize your opportunities to save for retirement.
First of all, if you are employed and have access to a qualified plan, you should contribute the maximum amount possible. If you are not able to contribute the maximum amount allowed, you should at least contribute the percentage matched by your employer. For example in 2009, you are allowed to contribute up to $16,500 to a 401(k) or 403(b) (if you are age 50 or older that amount increases to $22,000). If you cannot financially afford to contribute the $16,500, but your employer matches the first 5% of your contributions, then you should make every effort to contribute the full 5%. Otherwise, you are “leaving money on the table” that could be invested for your retirement.
Secondly, if you have contributed the maximum amount you can to your qualified plan or if you do not have access to a qualified plan, you can open or add to your traditional IRA. Your contributions to a traditional IRA may be tax deductible depending on your modified adjusted gross income and whether or not you and/or your spouse has access to a qualified plan at work.
Now is an excellent time to invest tax-deferred, whether it be in a qualified plan at work or an IRA because the market is currently down and we know we should try to “buy low and sell high.” It’s often difficult to continue investing when you see your account decrease in value, but remember if you continue your contributions while the market is down, you increase your chance of having more dollars in retirement.
First of all, if you are employed and have access to a qualified plan, you should contribute the maximum amount possible. If you are not able to contribute the maximum amount allowed, you should at least contribute the percentage matched by your employer. For example in 2009, you are allowed to contribute up to $16,500 to a 401(k) or 403(b) (if you are age 50 or older that amount increases to $22,000). If you cannot financially afford to contribute the $16,500, but your employer matches the first 5% of your contributions, then you should make every effort to contribute the full 5%. Otherwise, you are “leaving money on the table” that could be invested for your retirement.
Secondly, if you have contributed the maximum amount you can to your qualified plan or if you do not have access to a qualified plan, you can open or add to your traditional IRA. Your contributions to a traditional IRA may be tax deductible depending on your modified adjusted gross income and whether or not you and/or your spouse has access to a qualified plan at work.
Now is an excellent time to invest tax-deferred, whether it be in a qualified plan at work or an IRA because the market is currently down and we know we should try to “buy low and sell high.” It’s often difficult to continue investing when you see your account decrease in value, but remember if you continue your contributions while the market is down, you increase your chance of having more dollars in retirement.
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