Retirement Catch-Up-Part II 1/21/07

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Retirement Catch-Up-Part II 1/21/07

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC

Retirement Catch-Up-Part II

“Retirement Catch-Up- Part II”



Last week I led you through a simple process to help you determine if you are on track with your savings for retirement.  If you completed the exercise, you may have discovered that retirement seems more like a dream than a reality. However, the biggest advantage to planning for a successful retirement is time.  Hopefully you have five to ten years or more in which to devote yourself to this goal.  Here are my top strategies for winning the retirement game:


  • Increase your savings.  The most obvious suggestion is often the hardest.  However, it is my experience that people can easily cut ten percent from their spending without any significant change of lifestyle.  But if a lifestyle change is what you need in order to reach your goal, you should start adjusting now rather than waiting until retirement when you’ll have to make a much bigger adjustment for the rest of your life. 
  • Maximize contributions to retirement accounts.  Once you’ve discovered additional funds through more frugal living (strategy #1), the best place to invest is in your retirement plan. In most cases, you will get the benefit of a tax deduction for your contribution.  In effect, the government will assist you in your endeavor.  First, add to your company’s 401(k) plan at least to the extent of any matching contribution offered.  Next consider a tax deductible IRA if you qualify.  If you don’t qualify for a tax deductible IRA, contribute to a Roth IRA if you are eligible.  Finally, if you don’t qualify for either a traditional IRA or Roth IRA, you can still do a non-deductible IRA and receive the benefit of tax deferred earnings.  And in 2010, you can convert your non-deductible IRA into a Roth IRA based on a new law.
  • Invest for higher returns.  Consider a more aggressive investment strategy.  You could increase your allocation to stocks verses bonds, CDs and money market accounts.  Historically, stocks have earned about twice the return of bonds over time.  They are more volatile, however, so you’ll need to remain invested when stocks go through their periodic declines.
  • Adjust your lifestyle.  You may be able to solve your retirement shortfall dilemma by significantly altering your lifestyle.  You can “down-size” your home, retrieving equity that can be invested for retirement income.  When selling your home, the first $250,000 of gain is exempt from taxes ($500,000 for married couples).  Or, consider moving somewhere with a lower cost of living.
  • Continue working.  Many people continue working throughout retirement. You may leave your employer and start a second or third career doing what you have always dreamed about. I know one couple who found part-time jobs they love at a ski resort.  They are making less money but are having a blast and earning enough money to boost their retirement income while getting free season ski passes!


There are a number of different ways to address your retirement concerns.  What’s vital is that you do so sooner rather than later because time is your single greatest advantage.