Best Retirement Saving Options

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Countless retirement accounts are available, but the most important factor is saving in the first place

As retirement gets closer, Americans know they need to save more. But what is the best approach for the over 50 crowd? As you near the end of your working life, are you better off putting money in a company 401(k), an individual retirement account or a health savings account? The self-employed, who don’t have company 401(k) plans, have even more saving choices.

Use them all, experts say. What will matter most is that you save, not where you save.


“Put as much as you can in, and certainly take advantage of the catch-up provisions,” says Roger Wohlner, a financial advisor and freelance writer in Arlington Heights, Illinois, who blogs at”>The Chicago Financial Planner. Catch-up provisions allow Americans age 50 or older to contribute more to retirement accounts. There are some situations in which it makes more sense to maximize contributions to one plan over another, but the choice almost always depends on your individual situation. If you have specific saving questions, consult your accountant or a financial advisor.

First item for consideration: Your savings and investments thus far. Hopefully, you’ve been stashing funds away consistently, making maximum contributions to things like 401(k) plans and IRAs, as well as other accounts. These days, individuals 55 and older are on track to replace roughly 55 percent of their income during retirement with personal savings, Social Security and pension income, according to a recent study by the Fidelity Research Institute. That means they’ll have to live on 45 percent less cash each month once they retire.
How much is enough? That depends on your lifestyle and expenses, potential medical bills and the kind of support you’ll have from, say, a pension plan and Social Security. But, as you review your savings goals, be careful not to set the bar too low. Thirty-nine percent of current retirees say they underestimated their spending, and expenses increased in retirement rather than going down, according to Fidelity Research.

Call In the Experts

It may be a good idea to seek a little professional guidance to ensure you’re setting realistic goals. When asked in a recent poll by Employee Benefits Research Institute what was the most helpful thing they did to save, most respondents said it was hiring a financial adviser.

Ray Ringston, 79, says that hiring his financial adviser was one of the best moves he’s made. “I’ve never been interested in the money game,” says Ringston, who calls the prospect of managing investments “boring.” Instead, Ringston hired an independent investment adviser to do the job. “He’s done exceptionally well and I believe he’s trustworthy. If I had to do it over again, I would have tried to find someone in my 40s.”

Take Advantage of Catch-up Contributions

One of the first things a pro will encourage you to do is to keep saving. If you’re still working and over 50, there are ways to catch up. You can begin putting more money into tax-sheltered retirement accounts such as 401(k)s and IRAs. This year, individuals age 50 or older can save up to $20,500 in a 401(k) and up to $5,000 in an IRA.

Take advantage of these opportunities. “It’s not hopeless!” says Dee Lee, a Certified Financial Planner and author of “Women & Money.” To illustrate, Lee describes a couple that decides to tighten their financial belts. If each contributes $10,000 a year to a 401(k) plan, they’ll have about $90,000 each after 7 years, assuming the money grows by 7 percent a year.

Now for the caveat: In order to earn that 7 percent, you’ve got to be willing to take on some risk. Historically, stocks have earned just over 10 percent a year, while bonds have clipped along at roughly 5 percent. If you’re unwilling to invest in stocks, you may well wind up short of your goals.“The question besides ‘What do you need?’ is ‘What is your risk preference?’ “says Bellmer. “It doesn’t matter that you might need a 10 percent rate of return. You might not be able to handle the risk associated with that.”

Nevertheless, bold or not, planners will say most people in their 50s are too young to flee to the safety of cash instruments. “This is not the time when you go to cash,” says Ellen Rinaldi, executive director of investment counseling and research at mutual fund group Vanguard. “You may stay 50-50 in stocks and bonds. But you’re going to need growth in your portfolio.”

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