Getting a Late Start on Your Retirement Savings

If you are getting a late start on your retirement savings, you are definitely not alone. Many people across the world put off saving for retirement until they are getting very close to the traditional retirement age. Here are a few things to consider if you are getting a late start on your retirement savings.

Set Aside a Large Percentage

When you are getting started late on your savings, you are going to have to set aside a large percentage of your income in order to make up for it. When you get started early on in life, most investment advisors would recommend that you put aside at least 10 percent of your income. However, when you are getting started late, you should contribute more than that if possible. The percentage that you should set aside is going to be different for every individual. It will depend on how much time you have left until retirement and how much expendable income you have. You should try to set aside 20 to 40 percent of your income if at all possible. You should sit down with a retirement planner and determine exactly how much you are going to need to live comfortably during retirement. A retirement planner is going to be able to tell you what percentage of your income you should set aside in order to meet your goals.

Tax Advantaged Accounts

When you are saving for retirement, you will want to take advantage of tax advantaged accounts. These are going to allow you to put aside even more money than you would be able to invest normally. For example, with a 401k or an IRA, you are going to be able to fund the accounts with pretax dollars. This means that you can take money directly out of your pay before the taxes are taken out. This will allow you to get your savings started faster. You will be able to invest money in the market that would ordinarily go to the government in the form of taxes.

When you get started with this type of account, it is important that you learn the contribution limits for your type of account. You will be able to contribute only a certain amount of money every year. For example, with an IRA, you can contribute a maximum of $5000 per year or $6000 per year if you are over the age of 50. With a 401k, you will be able to contribute $16,500 per year or $22,000 per year if you are over 50. (These figures are current in July 2010.)

Regular Investment Accounts

In addition to putting money into retirement accounts, you may want to put money into a regular investment account. When you do not have much time left until retirement, you need to set aside as much money as possible. After you max out your retirement account contribution, you should put any additional money that you have into a traditional investment account.