Best Ways to Boost Retirement

KristaG tweets: Looking for info regarding saving for
retirement if I have no access to a 401(k) and I've
maxed my IRA.
Krista, you’re not alone, especially if you work for a
small company. While 94% of employers report
offering a retirement plan, such as a 401(k), to their
employees, a majority of these companies employ
1,000 workers or more. A separate survey finds that
70% of small firms provide no retirement savings
program whatsoever.
While you miss out on the tax advantages and
potential matching policy that typically accompany a
traditional employer-sponsored 401(k) savings plan,
you can patch together a smart and viable retirement
strategy on your own. Consider these moves in
addition to investing in a traditional IRA to fortify
your retirement nest egg.
Invest in a Roth IRA for tax diversity. A traditional
IRA, which you already have, allows you to contribute
– pre-tax -- up to $5,500 this year. If you’re over 50,
the limit is $6,500. This is a great way to save for
retirement and reduce your taxes today. Your
withdrawals in retirement are then subject to federal
income tax.
Similar to a traditional IRA, a Roth allows you to
contribute up to $5,500 a year for retirement, but the
contributions are funded with after-tax dollars. So at
age 59 ½ you can begin withdrawing all the money
from the account tax- and penalty-free. If you
anticipate being in a higher tax bracket upon
retirement, a Roth may help you save down the road.
Note: The IRS sets income requirements in order to
qualify for a Roth.
Invest in a taxable brokerage account. It may not
carry the tax benefits of an IRA, but a brokerage
account filled with a diverse mix of stocks, bonds and
mutual funds, lets you access your earnings at any
time penalty-free. (A tip: Consider adding low-cost
index funds to the mix). There are also no income
limitations or rules on how much you can contribute
each year. To minimize your tax exposure, assume a
buy-and-hold strategy, or at least avoid cashing in on
any investments within a year to pay a lower long-
term capital gains tax. In 2013, the capital gains and
dividend tax is: 0% if you fall into the 10% to 15% tax
bracket; 15% if you’re in the 25% to 35% tax bracket;
and 20% if you’re in the new 39.6% tax bracket.
Consider alternative investments. If you have money
left over and have an appetite for risk, alternative
investments like real estate, art and start-up funding,
have the potential to advance your overall retirement
plan. But these types of investments should comprise
no more than 5% to 10% of your portfolio since they
come with a good deal amount of risk.
Delay your Social Security checks. Finally, boost your
retirement earnings by delaying Social Security. The
longer you wait to collect your check, the more you
can earn. Depending on when you were born, your
“full retirement age,” at which point you can begin
collecting your “full” Social Security check could be
65, 66 or 67. Each year you delay your benefit, you
can see about an 8% increase in payout, according to
the Social Security Administration. Benefit increases
apply until you reach the age of 70, so ideally you
want to wait until then.
Michelle tweets: What are the best credit card
options for a graduate student to establish credit?
Hi Michelle,
Consider opening up your first credit card with a
bank or issuer that, first and foremost, you like and
respect and that makes you feel like a valued
customer. This doesn’t mean that they’ll put your
school’s logo on the card. It means that the issuer
will offer favorable terms like low interest rates, no
annual fee and great customer service. Ideally, you’ll
want to keep this card open and active for a long
time, which can help nourish your credit score.
Because you’re a credit newbie it may be difficult to
convince an issuer to load your first card with a
sizable credit limit of, say, over $5,000. And because
having ample credit in your name can help boost
your credit score, make sure to find out how much
credit each issuer is willing to provide prior to
signing up.
Ben Woolsey, director of marketing and consumer
research at CreditCards.com, who studies credit card
offers, recommends cards that aim to help young
adults build good credit. These cards carry no annual
fees and reward students with either points or cash
back for paying their bills on time: Citi Forward Card
for College Students and Journey Student Rewards
Card from Capital One.