When is it time to prepare for retirement?  Is it when your company begins to downsize?  Or is it when the company benefit contributions change and they no longer match your 401k or contribute to your health care costs? Or perhaps it is after you have funded your children’s  4, 6 or 8 year college degree program? Time creeps up on us and before we know it the clock has ticked, time has passed and the window left to save for our retirement is narrow.

When I began working there was not a retirement plan available to me.  401k’s  were initiated in the  70’s.   Well-known companies such as Johnson & Johnson, Pepsico and JC Penney, to name a few, were the first to establish 401k’s in the late 70’s and early 80’s.  Awareness and availability of retirement plans became more widespread in the 90’s.  Although I was brought up by parents that lived through the Great Depression and were taught to save, save, save they knew they could fund their retirement through Social Security, their savings and their pension plans. What a comfort knowing that Social Security and their pension would provide a monthly source of income for the rest of their lives and the savings, kept in a bank, was their emergency fund or cushion.  Pensions are not the norm today and we need to invest our money wisely to increase the value of our savings.

At the age of 15 (4 years ago), my daughter was offered a chance to contribute to a retirement plan when she worked at the YMCA.  It is never too soon to save!  Roth products are now available in both 401k’s (if made available) and IRA’s.  These plans offer after tax contributions.  That is, after the taxes are deducted from earnings the contribution is made.  The beauty is that any retirement distribution from the Roth 401k (or IRA) will not be taxed…yes, that includes any growth on the contributions as well.*

It is a different time….because we live longer we need more money to fund our retirement years.  Here are some ideas for saving :

•     Increase your 401k contribution by 1% every 4 months
•     To begin your 401k contributions start with 3% of your pay as a contribution- we all received a 2% increase in our pay due to lower taxes this year….be sure to save it.        
•     Mark on your calendar to increase your contribution by 1% every 3 months.  Although it will not even be noticed by you yet it will actually double your contribution to 6% in 1 year.
•     Keep your checking account balance reasonable, have a threshold…put the rest in a savings account.
•     Save your change at the end of each day- empty it into a container at home
•    A bonus, unexpected check or cash -no matter how small or large should be immediately placed in a separate savings account – and watch it grow. 

Speak to a Financial Professional about ways to maximize your savings to meet your needs.  They will look at things that will benefit YOUR situation by taking into account your age, tax situation and time horizon.  It is never too early (or late) to get on track for your retirement so be sure to…

                                                                                                   plan now to prosper  later.

*Roth IRA’s have eligibility and contribution limits.

By Barbara Case

Barbara Case is the Senior Vice President of Investments at Moors & Cabot Investments in Boston. Honored as a South Shore Woman of the Month--- for always giving back--- Barbara is now giving advice to the SSW community in her new financial column.