Nov 12

Better late than never for retirement planning

(BPT) – If you’re within 10 years of retirement and haven’t done any appreciable planning, you’re not alone.

Nearly half of Americans age 50 and older expect to retire later than they hoped, citing financial concerns, according to a 2013 study by the Associated Press-NORC Center for Public Affairs Research. And while you may be part of that group, keep in mind, it’s better to plan late than never.

A good benchmark on retirement readiness is the ability to replace at least 75 percent of your pre-retirement income at the age you qualify for full Social Security benefits, which is 66 or 67 for most people. Retirement income can come from a variety of sources, including Social Security, savings and a pension, if you have one.

“While people age 50 or older no longer have time on their side when it comes to retirement savings, there are strategies that can help you play catch up,” says Elaine Sarsynski, executive vice president, MassMutual Retirement Services division. “Pre-retirees have some levers to pull that younger workers may not.”

To help you make the most of your retirement planning, follow the tips below.

* First, take stock of where you are. Meet with a financial professional who can evaluate your retirement resources and project how much income you can expect if you retire at a certain age. Many 401(k) plans offer online tools to help you determine where you stand and how likely you are to replace your income based on your current assets and saving habits.

* Make the most of matching contributions. Say your employer matches contributions to your 401(k) plan up to 5 percent of your salary and you only contribute 2 percent, you’re turning down free money. Make sure you save enough to at least get the full match.

* Talk to your tax advisor about whether you should contribute to your 401(k) on a before- or after-tax basis. Pre-tax contributions may make it affordable to save a higher percentage of your pay by deferring some of your tax liability until retirement. After-tax contributions may reduce your tax liability in retirement.

* Take advantage of catch-up contributions. If you’re age 50 or older at the end of the calendar year, you are eligible to contribute up to an additional $6,000 to your retirement plan in 2015. That’s on top of the $18,000 limit for younger employees. Matching contributions from your employer do not count toward your contribution limit.

* Optimize Social Security. You can begin taking Social Security retirement benefits as early as age 62. But should you?

“It depends on a lot of things – your health, medical history, current cash needs, and future financial obligations, to name a few,” says Farnoosh Torabi, best-selling author and personal finance coach. “But one thing is certain: the longer you delay your application, the bigger your benefit will be.” The maximum benefit from Social Security starts at age 70. You can estimate your retirement benefit by using the Social Security Administration’s Retirement Estimator at ssa.gov/estimator.

* Don’t forget your pension. If you are entitled to a pension, this is an important source of income that should factor into your retirement planning. Your pension pays you a benefit at retirement based on factors such as your years of service and salary. Your plan administrator will have specific information about your plan.

“When it comes to saving for retirement, don’t let a late start dissuade you,” Sarsynski says. “Becoming more financially disciplined and making the most of your resources can go a long way toward helping you retire on your own terms.”

For more information about planning your retirement, go to www.RetireSmart.com.

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