GOLDEN VALLEY, Minn. - Don't be unprepared when it comes to your retirement plan.
Dan Ament, Financial Advisor with The Ament Group at Morgan Stanley Smith Barney in Wayzata, came on KARE 11 Sunrise to talk about ways you can prepare yourself for your golden years.
Things to do now if you haven't planned for retirement:
Build a plan - Part of reassessing priorities is ensuring you have a plan in place. Building a financial plan is an educational process. A financial plan takes into consideration all elements of your present and future anticipated financial picture. You will likely discover areas of your financial life you can harvest additional savings and in most cases you will discover how much more you need to save to make retirement someday a reality. Before committing, consider how much you are willing and able to fund for your children's college education given it is one of the largest financial obligations many parents will face. Be careful to make sure you have enough money to build and sustain your own retirement nest egg. After all, you can't borrow to fund your golden years.
Take advantage of increased contribution limits - Once people reach age 50, the amount of money they can contribute annually to their 401k and their IRA increases from $17,000 to $22,500 and from $5,000 to $6,000, respectively. Employees should take advantage of these higher contribution limits if possible, since contributions to these plans are tax deductible.
Downsize - While the level of downsizing for some could mean simply cutting down on small expenses such as eating out and shopping, for others, more drastic measures may be necessary.
Keep working - About 40 percent of current American employees plan to continue working until at least age 70, according to a 2011 study by the Transamerica Center for Retirement Studies. Working until a later age, whether full-time or part-time, gives people more time to build their nest egg while also reducing the likelihood that they will run out of money during their golden years.
Don't forget healthcare - Another burden facing retirees in the relatively near future is rapidly growing health care costs. A 65-year old couple who retires in 2012 should plan for $240,000 for medical costs, according to a study by Fidelity, provided the couple does not receive employer-sponsored health coverage. This figure, on average, has risen 6 percent annually since 2002.
Don't roll the dice - If someone has failed to save enough for retirement by their 50s, it may be tempting to build a portfolio full of stocks to play catch-up. Be careful when adding risk to your strategy. Someone who has not saved anything for retirement by age 50 may choose to take more, but not excessively more, risk than someone who saved since they were in their 20s.
Beware of financial scams - 'If it sounds too good to be true .....' Unfortunately, there are people out there that want to take advantage of you. Be thoughtful before committing to an investment. Understand the people and strategies you are engaging. Those ages 60 and older lost at least $2.9 billion due to these scams in 2010, according to a recent joint study from Metlife Mature Market Institute, the National Committee for Prevention of Elder Abuse and Virginia Tech University.
Don't skimp on insurance - It is important to keep up with insurance payments in order to prepare for the unexpected. Such plans as life insurance and long-term care insurance can ensure a person's spouse or children aren't financially devastated in case of unfortunate events.
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