Retirement saving is more important than ever

Financial Tip of the Month
November, 2006

Studies repeatedly show that we fail to save enough on our own for retirement. The earlier you start and the more you save, the more comfortable your later years can be.

Fortunately, it's never been easier to save in tax-advantaged accounts such as 401(k) and similar plans. These plans offer a flexible way to cut your current taxes while you accumulate savings. Recently Congress made changes to encourage participation and to make these plans more attractive.

One change is that you could find yourself automatically enrolled in your company's 401(k) plan as soon as you become eligible. You'll have the chance to opt out, of course, but you should think twice before you do. Here are some reasons why.

• Automatic savings can become painless. It's much easier to save if part of your paycheck goes into the plan before it goes into your pocket.
• If your employer matches your plan contributions, it's like receiving "free" money. A 50% match means you receive a 50% first-year return on your contribution - and that's before any investment earnings.
• Features such as today's higher contribution limits and catch-up contributions for older workers were due to expire at the end of 2010. Now they've been made permanent, and they'll generally be indexed for inflation in future years.
• Beginning in 2007, you'll be able to receive personalized investment advice from your plan provider.
• If you name a nonspouse as beneficiary, that individual can make hardship withdrawals from the plan or preserve the tax benefits if they inherit the plan proceeds.
• You'll also see more employers offering a Roth 401(k) option. This option trades off the upfront tax benefit in return for tax-free distributions when you retire.

So if you find yourself automatically enrolled, don't rush to opt out. At least try it for a few months before deciding not to save. In fact, you should consider increasing your contributions if you can afford it.

Ciuni & Panichi, Inc.
Certified Public Accountants & Business Consulting Firm


25201 Chagrin Boulevard
Cleveland, Ohio 44122

(216)831-7171
Fax:(216)831-3020

Questions for our Financial Expert?
E-Mail us at:
finance@ClevelandSeniors.Com