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The face of retirement has changed.
Here are some ideas to help you keep pace with today’s retirement.
1. Increase Your 401(k), or Other Employer Sponsored Retirement Plan, Contributions
Maximizing your 401(k) plan contributions makes sense for three very good reasons: 1) Contributions reduce your taxable income; 2) Contributions accumulate and grow tax deferred; and 3) Contributions are typically matched by your employer. Let’s look at what might happen if you increased your contribution limit from 3% to 6%.
| Contribution Percentage: |
3.00% |
6.00% |
| Annual Salary: |
$35,000 |
$35,000 |
| Total Monthly Contribution: |
$87.50 |
$175.00 |
| Total Yearly Contribution: |
$1,050.00 |
$2,100.00 |
| Total Yearly Tax Savings: |
$262.50 |
$525.00 |
| Total Yearly Employer Match (at 50%) |
$525.00 |
$1,050.00 |
| Total Account Value in 10 Years: |
$23,793.00 |
$47,587.00 |
| Total Account Value in 20 Years: |
$75,162.00 |
$150,323.00 |
Past performance does not guarantee future results.
This chart is hypothetical in nature and is not indicative of any particular investment.
By increasing your contributions, not only could you increase your bottom line, but you may decrease your tax burden and increase the monies invested on your behalf by your employer.
Use our 401(k) Savings Calculator to see how increasing your current contribution may help you build your retirement nest egg.
2. Open a Traditional or Roth IRA
An IRA is a great retirement tool if you: 1) Don’t have an Employer Sponsored Retirement Plan; 2) Have maximized your Employer Sponsored Retirement Plan; or 3) Are changing jobs or retiring and need to roll your Employer Sponsored Retirement Plan into another tax-sheltered investment.
For more than a quarter century, IRAs have provided investors with an exceptional, flexible, tax-deferred way to put money aside for the future. Thanks to the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which increased contribution limits and expanded portability provisions, IRAs are now an even better way to save for retirement.
There are two types of IRAs: Roth and Traditional. Contribution limits are the same for both ($4,000 for 2006 and 2007) and each IRA allows for tax-advantaged growth potential. But there are some important differences you should understand before investing. View our IRA Comparison Chart or use our Roth vs. Traditional IRA Calculator to help determine which IRA is better for you.
To open an Cavanal Hill Funds IRA, we invite you to download a prospectus and application
3. Take Advantage of Catch-Up Contributions
In addition to increasing contribution limits and expanding portability provisions, EGTRRA introduced "Catch-Up Contributions" for pre-retirees, age 50 and older. Don’t miss this opportunity to save an additional $5,000 (for 2006) in your Employer Sponsored Retirement Plan ($2,500 for SIMPLE IRAs) and $1000 in your Traditional and Roth IRA.
4. Rebalance Your Employer Sponsored Retirement Plan or IRA
Whether you have a 401(k) or IRA, it is always a good idea to look at your retirement portfolio once a year and ask yourself:
- Have I made any life changes that would cause me to make adjustments to my account?
- Do I need to change my beneficiary information?
- Have market fluctuations caused my portfolio allocations to shift and become unbalanced?
- Am I still on target to meet my retirement goals?
Your financial advisor can help you answer these and other important financial questions. Contact Us if you need help finding a financial advisor in your area.
For more TIPS, TOOLS and TECHNIQUES on building a better RETIREMENT visit:
Retirement Central
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