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| Getting a Late Start? |
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| Time is the retirement saver's great ally — the longer you have to invest, the more time your money has to potentially grow. But just because you're getting a late start doesn't mean that you can't make solid progress toward a retirement goal. This article can help you find ways to save more and accounts and strategies to help you save more intelligently. |
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| More than half of American households (56 percent) are behind where they should be in saving for a comfortable retirement.* |
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| Every Little Bit Counts |
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| Even if you have only a few years until you retire, any money that you do save may be used to offset the effect of declining purchasing power from fixed sources of income (e.g., certain pension income). If you save more money now, and leave it invested until the purchasing power of your fixed income begins to decrease, you may be able to withdraw money from your retirement savings to help offset inflation. |
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| Sources of Retirement Income |
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| Social Security benefits typically rise as the cost of living increases. But Social Security alone will make up only a portion of what people may need for retirement income. |
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| Many other sources of retirement income, such as fixed pensions, fixed annuities, or interest and dividend income from fixed income investments, generally do not keep pace with inflation. Some other sources of income such as pensions which provide a cost-of-living-adjustment (COLA), variable annuities and stock investments may provide income which can increase over time to help offset the effects of inflation. To counter the effects of inflation on your retirement income, you may need substantial retirement savings, even if your retirement income when you first retire seems adequate. |
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| Increase Your Savings — In Your Workplace Plan |
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| A special provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 allows investors age 50 and over to make "catch-up" contributions to workplace savings accounts, including 401(k)s, 403(b)s, and 457 plans and SIMPLE IRAs, if allowed by their employer. In 2005, this may allow for an additional contribution of up to $4,000. |
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| If you have a Fidelity employer-sponsored retirement plan, log into NetBenefits today to learn more about the catch up contributions. |
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| Increase Your Savings — In an IRA |
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| The tax laws have also provided for higher contributions to Individual Retirement Accounts (IRAs). The maximum annual contribution limits for all savers rise as follows: |
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| Rising IRA Contribution Limits |
| 2005-2007 |
$4,000 |
| 2008 |
$5,000 |
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| After 2008, the limit will be adjusted for inflation in $500 increments. |
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| Take Advantage of "Catch-Up" Opportunities |
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| In addition to these contribution limits, workers age 50 or older by December 31 of the year for which they are making the contribution will be able to contribute additional "catch-up" contributions as follows: |
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| "Catch-up" Contribution Limits |
| 2005 |
$ 500 |
| 2006 and after |
$1,000 |
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| After 2006, limits will be subject to cost of living adjustments (COLAs) in $500 increments. |
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| IRAs for the Stay-at-Home Spouse |
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| Non–wage earning spouses can contribute up to $4,000 (the contribution limit) to their own Roth IRA or Traditional IRA provided the other spouse qualifies and the couple files a joint federal income tax return. This IRA contribution is in addition to any IRA contribution the wage–earning spouse makes, meaning eligible married couples could contribute up to a combined total of $8,000 for the 2005 tax year, to contributory IRAs each year. Spousal IRAs are also eligible for make-up contributions as described above. |
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| Get Started Now |
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| Money you save now, even if only a small amount, has the most time to benefit from the saving principles of time, compounding, and tax-deferral. Additionally, it may never be easy to begin saving a larger percentage of your earnings all at once. Starting small and building your savings over time can be a good step toward reaching your goal. |
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