Keeping that New Year’s Resolution

March 31, 2019

January 1st, the day so many of us wake up to and make the infamous resolutions that THIS will be the year that we will begin to eat right, exercise more, and even save more earnings for retirement. Look at your calendar. It’s now April. How’s your master plan going? If you’re like most Americans, you’re most likely still eating too much red meat, while you’re sitting on the couch watching Games of Thrones, 10 pounds heavier now, and your plans to increase your retirement savings is still just that—a plan. Well, even though a third of the year is almost gone, it’s still not too late to do something about keeping some of your resolutions. This month we’ll concentrate on your retirement plans. So, put down that burger, turn off that television, and read on.

If you’re contributing less than the maximum amount to a retirement account, now is the perfect time to consider an increase. Whether you are a new recruit to the field or a seasoned veteran nearing retirement, it is never too late. However, just like the lotto, if you don’t play, you can’t win. Even small increases (for example, an additional $25 per pay period) can have a significant impact on your account balance over time.

Remember, you now have multiple tax-advantaged ways to save: pre-tax, after-tax, or a combination of both. Pre-tax savings provide a tax advantage at the time of contribution, with taxes paid upon distribution. After-tax savings (also known as our Roth option) provide a tax advantage at the time of distribution, with no taxes paid on any account earnings (if the account is held for at least five years and you’re at least age 59½).*

What can you do to save for retirement?

The sooner you start to save, the larger your nest egg will be upon retirement. Don’t worry if you’re nearing retirement – better late than never when it comes to saving. It’s nice to have a pension in your back pocket, but will it be enough? Family vacations, college educations, or even elderly care for you or your spouse, life has a habit of getting in our financial way. Because there are too many variables to predict what will happen between today and the day you’re set to retire, you need choices. If you’re afraid your pension won’t cut it, here are a few options:

Retirement Accounts:
• Deferred Compensation Regular Saving Account
• Roth IRA Annuities
• Traditional IRAs Mutual funds
• CDs (Certificate of Deposit)
*Source information: Los Angeles City Deferred Compensation

Now that you’ve selected your retirement vehicle, it’s time to contribute to it. Most experts will agree: One basket of money is good; two or more is better. Do not limit yourself to just one type of account. Having multiple places to draw money from in retirement will give you options. This is where a financial planner will come into play. Discuss with them your individual situation and projected retirement needs, and let them develop a plan for you. Just remember, it’s your money. Be smart with what you do with it. There is no shortage of financial advisors out there, so do your homework before you choose the right one for you. With every paycheck you earn—before you pay your bills, before you go on an online shopping spree—pay yourself first and set aside a reasonable portion to go into your chosen retirement vehicle (Deferred Compensation, Roth IRA, 403(b), CD, or whichever savings account you’ve selected).

Calculate your contributions regularly. For example, as of 2017, members below the age of 50 can contribute up to $18,000 a year towards the City’s Deferred Compensation plan; members 50 years of age or older, $24,000; and those within five years of eligible retirement, Catch-up amount is $36,000. (The Age 50 and Catch-up provision cannot be used in the same calendar year).**

There are some great calculators online to show you how fast your money can grow. Keep track of your monthly contributions, current principal, and interest rates on your retirement accounts. If possible, monitor your accounts growth from time to time. Make changes as needed but with care. On a yearly basis ask yourself some simple questions: Are you on track to build a nice nest egg for you and your family? Do you need to add additional funds this year? Yes, pensions are helpful, but do pensions unilaterally help you retire comfortably, or are there too many variables such as those discussed earlier?

When it comes to your retirement, don’t mess around with your money. When in doubt, consult a trusted professional. Retirement is supposed to be an enjoyable time in your life when you can reap the benefits of years of hard work. Make sure you plan accordingly.

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