revealed that 24% of all workers were not confident that they are prepared financially to retire comfortably in their golden years. For African Americans, the figure was 28%. And the top reasons that African Americans started a savings program were 62% felt that they couldn’t rely on Social Security, while another 59% indicated that seeing seniors struggle in retirement served as a primary motivator. To drive the point home, the Michigan study also shows that in 1999 the median black household held barely 9 cents for every dollar of wealth that white households held.
Regardless of your age, build assets now. First, figure out how much money you will need to retire comfortably. The Retirement Planning Worksheet in our Wealth Building Kit can help you make such a determination.
One means of resisting the temptation to fritter away today’s dollars is to sock them away in a savings and investment plan through your workplace. By investing in company-sponsored retirement plans such as your 401(k) or 403(b), you contribute dollars that grow geometrically-and, most importantly, tax-deferred. The kicker: your employer will usually match a portion of the money that you put into the plan. Experts suggest that you max out your contributions-pump as much funds into your account as possible. The maximum allowed is $10,500 annually.
Structure your own retirement program. Don’t rely solely on your company plan to build up assets. After the company-sponsored plan is fully funded, place your hard-earned dollars into such vehicles as a nondeductible Roth IRA, which will provide you with tax-free withdrawals after the age of 591/2 if you’ve held the account for five years or more. However, the law governing Rot
h IRA plans sets limits on the income level of participants. For single taxpayers, it’s from $95,000 to $110,000; for couples, it’s from $150,000 to $160,000. Contributions to the account are limited to $2,000 per year for each taxpayer.
To grow tax-deferred dollars without the limitations, invest in variable annuities, an insurance contract which provides a number of mutual fund options. The annuity guarantees a payout at a specified time, usually upon retirement, while the vehicle offers a variety of stock- and bond-fund offerings. However, if you withdraw funds early, you will be hit with the same 10% penalty you would pay for pulling funds prematurely out of other retirement vehicles.
Divvy up your assets. As you devise your wealth strategies-especially as they relate to retirement-divide your money into several asset groups. This will help you keep track of your myriad investments while creating a hedge against economic shifts and market swings.
Asset classes include cash equivalents (CDs, checking and money market accounts), bonds and real estate. The asset and liability organizer can help you identify and place a value on these investments. In fact, see a financial planner about developing an asset allocation plan. First, determine if you’re willing to lose money in a given period, whether it’s quarterly, semiannually or annually. Fill out an investor’s profile to determine your risk tolerance and investment objectives. The key is