There’s Still Time to Put Money Into an IRA for 2012

What would you say to someone in their late 40’s who had no retirement savings?  Are you one of those people?  While it is certainly not the best case scenario to have no retirement savings in your 40’s, starting now is better than never saving at all.  CNN Money’s Walter Updegrave was asked in “Help! I’m in my late 40’s, with no retirement savings,” what a single woman in her 40’s should do in this situation.  I’m glad he wasn’t doomsday with her in his response, although the truth is a little painful.

Unfortunately for this particular situation, her employer does not offer a 401k plan, only health insurance.  Mr. Updegrave points out the positive in the situation; that she still has a couple decades to save for retirement and that she is starting now rather than putting it off even farther.  In order not to rely solely on Social Security in retirement, since it doesn’t lead to a very comfortable lifestyle, the woman needs to start saving as much as she can right away.  The first step for her would be to open an IRA and put $5,000 (or as much as she can) in before April 15th.  She can still apply those funds for 2012 and take the tax deduction that comes with a traditional IRA.

The article recommends investing in a target-date retirement fund from Money’s MONEY 70 list to help diversify your stocks and bonds and automatically get more conservative towards retirement age.  After putting money into the IRA for 2012, she should start putting money away for her 2013 IRA savings.  The maximum for this year is $5,500.  By investing the maximum each year, which goes up to adjust for inflation, she could have well over $200,000 by her late 60’s with a 6% return.  After 50, the government allows for you to invest an additional $1,000 each year if you need to catch up on your savings.

Another option for this woman would be to find a new job that offers a 401k plan with matching employer benefits.  Not only can she contribute $17,500 this year, the automatic paycheck deductions and employer’s matching money make it simpler than any other way to save for retirement.  This may not be possible, but it is worthwhile for her to at least look for a new job that would make a huge difference in her retirement savings for the future.  Once she has saved money for a couple decades, she can use some of it to purchase an annuity and help cover the living expenses not met by Social Security.  Using a retirement calculator is a helpful way to see how much money you’ll need when you retire.

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