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Gen Xs Savings for Retirement on Target

Gen Xers have long had the reputation of being lazy, misguided slackers.

When it comes to saving for retirement, however, studies show that this may be an undeserved distinction.

"In comparison to previous generations, (generation X) is doing well. They are focused on the need to save for retirement at an early age," said Paul Yakoboski, senior research fellow at the Employee Benefit Research Institute (EBRI).

"In comparison to previous generations, (generation X) is doing well. They are focused on the need to save for retirement at an early age."

Generation X are folks born between 1965 and 1976, one of the "most fiscally responsible and sophisticated (generations) in memory."

Retirement on Their Shoulders
Many gen Xers realize they're responsible for their own retirement.

A Survey by Scudder Kemper found that 71% of gen Xers regularly save some of their income. Surprisingly, that's on par with folks in older generations who presumably have higher incomes. About 76% of baby boomers (folks born between 1946 and 1964) and 72% of the World War II generation (folks born before 1933) save some of their income.

The leading reason gen Xers save is that few expect the volatile Social Security system to provide adequate retirement income. At the same time, about 16% of older baby boomers, those born between 1946 and 1953, expect Social Security to be the most important source of retirement income.

Children See, Children Learn
Another major factor behind gen Xers' outlook is their parents' experience.

Steve Hess, 36, and his wife Lisa, 32, save diligently. "My parents have money pressures. I don't want that," Hess, a firefighter, said.

Using Technology to Boost Returns
Many gen X savers are using technology to build decent nest eggs.

Stay in Your Protective Shell.... part1

You're changing jobs and you've got several thousand dollars in your former employer's 401(k) plan. What to do?

It looks like that money could just about cover credit card bills you've built up. Should you wipe the slate clean by paying those bills, and start fresh with a new job and outlook? "No! No! No!," say retirement experts.

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With people reportedly changing jobs about every five years or so, on average, it's apparent that many workers, at one time or another, are going to have to decide what to do with their 401(k) money when they change jobs.

Regrettably, most are not making the smart choice.

Financial planners are united on this one point: Leave your retirement funds, no matter how small, within tax-deferred savings accounts.

Yet, this advice is falling on deaf ears. A recent study shows American workers are cashing out of their 401(k) plans at near-record rates.

Sixty-eight percent of employees opted to take a cash payout from their 401(k) plan when changing jobs, according to a Hewitt Associates study. Only one-third of workers roll their balances into an IRA or a new employer's plan.

Avoid Age 55 Early Retirement Pitfalls

If you have the money, taking retirement at age 55 is a tantalizing thought. But, the mechanics of doing so can be a little tricky. And, if you don't know the tricks of the trade, it can also be expensive.

Knowing there's potential for pitfalls, Rod Apple, a 54-year-old steel industry executive, is concerned. He doesn't want to mess up his ability to reach the goal he set 30 years ago. "In my 20s, I decided to retire at age 55. It was a long-term goal," he said.

After years of working in a business that never shuts, Apple is just a few months away from getting out of the "high pressure" grind, as he calls it, and has a few questions.

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"It's my understanding that I can make withdrawals from my 401(k) without penalty. Is that correct? What forms need to be filled out to avoid future IRS challenges?" he asks.

Apple's questions are common. If he doesn't have the right answers, he could end up forfeiting a substantial chunk of his 401(k) balance to taxes and penalties.

Are You Ready to Retire Early?

Office politics, incessant meetings, and two-hour commutes. All the familiar frustrations of the rat race. When does it end?

It could end tomorrow if you're 55. You've reached the age when you can retire and not have to pay a penalty on your 401(k) withdrawals. But it's not all that simple; you need to know about a few important rules.

Taking early retirement is not as easy as simply quitting your job.

Financial planner, William Robertson, has a 56-year-old client with a mid–six-figure retirement balance who wants to retire right now. She's concerned about whether she has enough money to last throughout retirement and how best to access that money.

More specifically, Robertson and his client wondered if there would be a penalty if she took the 401(k) money immediately.

In her case, the short answer is no. For others in a similar situation, the answer might be yes. Knowing the rules governing 401(k) and IRA withdrawals might influence the larger question of whether taking early retirement is right for you.

Avoid Penalties

While you are employed, you can generally begin to withdraw money from your 401(k) account without a penalty when you reach 59½. Unless you qualify for a hardship exemption, you will have to pay a 10% penalty tax to the IRS if you withdraw money earlier than that.

"Most folks don't understand the amount of money that's required to retire."

—F. Dennis DeStefano, certified financial planner and president of DeStefano Wealth Management.

Retirement Options - Retiring Early

Many people dream of retiring early. If that describes you, you need to consider the implications of such a move on your retirement accounts.

You can withdraw money from your traditional IRA or Roth IRA before you turn 59½. However, you might be subject to taxes and penalties unless you meet the approved exceptions.

With a traditional IRA or a Roth IRA there is a way to withdraw money before you turn 59½ and not pay penalties. Here's how.

You can arrange to receive a series of "substantially equal" payments over your life expectancy or the joint life expectancy of you and your beneficiary. If you have a traditional IRA you will owe income tax on these payments, but you won't have to pay the 10% early withdrawal penalty. If you have a Roth IRA you won't owe income tax.

There are three acceptable ways to calculate how much this payment must be.

Retirement is the Biggest Bill You'll Have to Foot

When you think of the big bills you'll face in life, your mind probably turns to the usual suspects: a television set, braces for your kids, vacations, a car, a house, college expenses, possibly medical bills….

You probably spend a certain amount of time thinking about and planning for these purchases before you make them, right? How much?

There's one you may not have thought about, even though it is probably going to be the most costly purchase you make - probably bigger than your house and your kids' education combined.

(And that's no small potatoes. The median sales price of new houses in June 1999 was $157,000, and the average price of a four-year private college education these days is about $100,000 -- more for an Ivy League school.)

So what is this big purchase I'm talking about? Retirement. How much time do you spend planning for that?

Think about it. The average 65-year-old today can expect to live for another 17 ½ years. That's an average figure, so in your case it could be less…or it could be more.

Say you retire at 65 and live to be 80. You'll have 15 years of living to fund without earning a salary.

Investing for Retirement in Your 70s

Don't Stop Planning for the Future

Being in your 70s means much more than investing in green fees and (finally!) those new golf clubs. Later retirement years pose sophisticated challenges to retirement planning and saving.

Some common issues for an investor's later years include reviewing portfolio allocation and investments, 401(k)-plan and IRA income distributions, and estate planning.

Today, retirement investors in their 70s have more to consider than they might think. From estate planning to investment decisions to choosing a health-care strategy, retirement-planning options for this age group are much more sophisticated than ever before.

Anticipating future income and lifestyle needs is essential for those in their 70s who want to make the most of their retirement years.

How can older investors possibly anticipate and manage their family's changing financial needs? It's all in the planning.

Still a Time for Planning

According to the National

Rules for Roth IRAs

Retirement accounts get added attention during tax-filing season. That's because you must put money in an individual retirement account no later than the April return-filing deadline. It doesn't matter whether your contribution is to a traditional IRA (tax-deductible or nondeductible) or a Roth IRA.

If you opt for a Roth account, you won't get an immediate tax break, but you won't pay any tax on your money when you eventually take it out. The Internal Revenue Service, however, has specific rules on just who can have a Roth IRA and how much money can be contributed each year.

Contribution limits
In general, Roth contributions are the same as traditional IRAs. Last year, you were able to contribute up to $4,000. (The maximum annual contribution stays at that amount for 2006.)

If you were 50 or older last year, you could have put in an extra $500. (That catch-up contribution amount is $1,000 this year).

However, you can't put more in any IRA than you make. So if your income is only $1,500, then $1,500 is the most you can contribute to a Roth.

Bennies of 401(k)

Let's look at some of the unique benefits of 401(k)s.

Pretax Investing
As we mentioned, your 401(k) contribution is deducted before taxes are taken out. That helps you in two ways.

First, it means you will be taxed on a smaller gross income, so your income tax bill will be less. Say you have elected to contribute 6% of your salary to your 401(k). The income tax bill you pay will be based on your salary minus that 6%. So if you were earning $30,000 per year, were taxed at the 1998 rate of 28%, and contributed 6% to a 401(k), your annual tax bill would be $500 less than if you were not contributing to a 401(k).

Second, pretax investing also increases your investing power. In the example above, 6% of your pretax income amounts to $1,800. But 6% of your post-tax income comes to less than $1,700. If you wanted to match that $1,800 through post-tax investing, you'd have to cut into your own take-home pay.

Investing for Retirement in Your 60s: Do the Golden Years Start Now?

Investing for Retirement in Your 60s: Do the Golden Years Start Now?

Your golden years are supposed to start in your 60s. Yet many people seem to be working harder than ever in this decade of life.

The 60s is still a time to end your traditional career, but with folks living longer, healthier lives, these years have a new look. More often than not, folks are heading right back into the work force.

Al, 68, is busier in retirement than he ever was during his working years. In the year since he retired from the government, he's developed a budding second "career" as a volunteer handyman. This isn't what he expected.

"I imagined retirement would be kicking back and reading, doing a lot of sailing, and playing around," he said.

"I imagined retirement would be kicking back and reading, doing a lot of sailing, and playing around."