By Gregory Karp

Your retirement [1] nest egg -- more likely laid by a hummingbird than an ostrich?

If you want to jump-start your retirement [1] savings, here are a few tips:

• Make it automatic. Saving for retirement [1] is often one of those good intentions that goes unfulfilled. Sign up for an employer retirement savings plan so the money [2] comes right out of your paycheck. Or set up a retirement account on your own, and fund it with automatic monthly withdrawals from your bank account.
• Save the raise. Put part of every annual pay increase toward retirement [1] savings. For example, if you get a 4 percent raise, boost your retirement contributions from 10 percent to 12 percent of your income. You won't miss it.
• Take free money [2]. If your employer matches contributions, contribute at least enough to your employer plan to get the match. It's free money.
• Pay taxes [3] now. Roth Individual Retirement Accounts (IRAs) and the new Roth 401(k) plans are ideal savings vehicles. You contribute take-home pay to the account. In retirement [1], you withdraw the money [2] -- and the growth on the money -- tax-free.

  If you don't qualify for a Roth because you make too much money [2] and don't have a Roth 401(k) at work, consider saving retirement money in a regular investment account. You put in after-tax money, taxed at today's relatively low income tax rates. Then at retirement, you withdraw money and pay only capital-gains taxes, today 15 percent, on the growth, as opposed to regular income taxes, which could reach 30 percent or more.

  "People should try to diversify across tax-deferred and taxable accounts," says Christopher Jones, a fee-only financial planner in Palmer Township, Pa., who will soon open a Keystone Financial Planning office in Macungie, Pa.

• • Pay taxes [3] later. Typical employer plans, called 401(k) or
    403(b) plans, along with traditional IRAs, are tax-deferred accounts.
    That means you pay no tax [3] on the money [2] now. In retirement, you take out
    the money [2] and pay regular income tax.

    Don't get flustered by which savings account gives you the best tax [3]
    benefit. It's more important to start or increase your contributions
    than get the absolute best retirement [1] account. Start with whatever plan
    is easiest, then adjust your plan as you learn more or get advice from
    a financial professional.
    

  • Aim to be a millionaire. A million bucks in retirement [1]
    doesn't buy what it used to. How much do you need? A rough estimate is
    that every $1 million in retirement [1] nest egg will generate $40,000 in
    yearly income, Jones said, on top of any pension or Social Security.

    If you want to refine your savings goal, use retirement [1] calculators [4]
    found in such financial software as Quicken and Microsoft Money, as
    well as online at such sites as www.dinkytown.net [5].

    Start by saving, say, 6 percent of your earnings and raise the amount
    regularly. Warns Jones, "Saving 10 percent isn't even remotely enough."
    

  • Don't get discouraged by the big numbers. A
    40-year-old earning $50,000 and contributing 15 percent to a retirement [1]
    plan has a very real chance of amassing $1 million by age 65, even if
    he starts with no savings at all.

  Source: The Morning Call. Powered by Yellowbrix.

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