Christine and Stephen Toma have more-modest goals for their retirement stash. But they're thankful that their employer, Kuchera Industries, in Johnstown, Pa., has prompted them to make saving a high priority.
| Row 0 - Cell 0 | Six Ways to Build Your Retirement Savings |
| Row 1 - Cell 0 | How Working Longer Adds Up |
| Row 2 - Cell 0 | The Cost to Crack Your Nest Egg |
Ever since she went to work as a marketing representative for the circuit-board manufacturer two years ago, Christine contributed 4% of her annual salary to her 401(k) plan, enough to capture the company's matching contribution. Stephen, who recently joined the company as a photographer and videographer, signed up to contribute 5% of his salary.
Then the Tomas took advantage of the Principal Financial Group's Milestone advice program, which is offered free through their employer. The financial profile they received included individual projections of how much money they would have by age 65, based on their current contributions, plus suggestions on ways to boost their savings. "The numbers they showed us initially were scary," says Christine. "We would have been living in poverty if we had stuck with the amount we were contributing."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Christine and Stephen each signed up to increase their salary deferral automatically by two percentage points a year. They also decided to roll over retirement accounts from their previous employers into their company plan and to invest all of their money in target-date retirement funds appropriate for their goals (see "Funds That Keep It Simple," on page 39). The Principal adviser showed them how they could shift more money into retirement savings once they pay off two car loans, which total about $600 a month.
Christine, 41, says she would like to retire from her current job at age 50 and try something new. And the Tomas have a handful of aces in the hole that could make that possible: an affordable cost of living in Johnstown, a mortgage that will be paid off in nine years, and Stephen's passion for his job, which he says he'd be happy to keep indefinitely.
Fortunately for the Tomas -- and anyone else looking to bolster retirement savings -- working just a few years longer can make a huge difference in retirement income. If you continue to work, you can contribute to your savings for a few more years, delay tapping your nest egg and reduce the number of years that your assets will have to generate income.
In addition, a few extra years on the job could mean continued access to employer-provided health-insurance benefits until you become eligible for Medicare at 65. And the longer you wait to collect Social Security benefits, the bigger your benefit will be (until age 70, when delayed-retirement credits end).
Delaying retirement does not necessarily mean delaying gratification, says Christine Fahlund, chief financial planner for T. Rowe Price. Even if you stopped saving for retirement and spent the extra dollars on travel or anything else that struck your fancy, you could still boost your nest egg, and consequently your retirement income, says Fahlund.
That's because every dollar you earn is a dollar that doesn't have to be withdrawn from retirement savings. In fact, a recent analysis by T. Rowe Price shows that someone who works an additional three years beyond 62, saves 25% of his gross income and delays collecting Social Security benefits until 65 would increase his total retirement income by 28% -- about the same amount as someone who worked four years longer with no additional savings and began collecting Social Security benefits at 66.
NEXT: FROZEN PENSION FUNDS
SEE ALL NEST-EGG WOES
No. 2: Lack of Focused Strategy
No. 4: Little Savings for Retirement
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Lowe's Stock Is Falling After Earnings. Here's WhyLowe's stock is lower Tuesday as Wall Street weighs a beat-and-raise quarter against declining revenue. This is what you need to know.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
-
Medicare Basics: 11 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
Six of the Worst Assets to Inheritinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2024 and 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 in 2024 and $70,000 in 2025..
-
Roth IRA Contribution Limits for 2024 and 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2024 and 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2025retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
