As 2007 draws to a close, TIAA-CREF, the financial services organization and leading provider of financial services in the academic, medical, and cultural fields, reminds individuals to take advantage of one of the easiest and most tax efficient ways to save for retirement by contributing the maximum amount to their defined contribution retirement plans by year-end.
While saving for retirement has always been important, it may be more so today. Even with Social Security payments, a person who retires today at age 65 from a job with an annual salary of $60,000 needs roughly $1 million on hand (net present value) to maintain his or her standard of living, keep up with inflation, and pay for health care coverage for the next 25 years. 1 Americans’ actual amount of retirement savings isn’t keeping pace. The median net worth of households with a head age 55 to 64 is $249,000. 2
“Saving for retirement depends heavily on the kind of lifestyle you want to live in retirement -- it’s a very personal decision for everyone and so it’s hard to make broad generalizations,” said Maliz Beams, Executive Vice President, Individual Client Services. “But two-thirds of the people we talk to do NOT expect their lifestyle to change drastically once they retire -- for this reason alone, people need to take advantage of savings opportunities, including employer matching, and save as much as they can in their individual retirement plans.”
Generally most people can save as much as $15,500 in employer-sponsored defined contribution retirement plans - such as 403(b), 457(b) and 401(k) plans - in 2007.3 If you are over age 50 and/or have worked more than 15 years at certain types of institutions, you may be able to contribute even more. For example, individuals age 50 and above can elect to make and additional $5,000 in “catch-up” contributions to 403(b), 401(k) and governmental 457(b) plans in the 2007 tax year.
Retirement savers should check their year-to-date contributions to these retirement plans. If they have not reached the maximum amount for employee contributions, they can increase their payroll deductions toward retirement plans for the rest of this year to bring them closer to those limits. This is important because taking advantage of tax-deferred contributions in a qualified retirement savings plan will help maximize the benefits of retirement savings.
Some questions employees should ask their employer include:
Other tips for saving for retirement:
Learn more about how to maximize your retirement plan savings.
About TIAA-CREF
TIAA-CREF is a national financial services organization and the leading provider of retirement services in the academic, research, medical and cultural fields with more than $437 billion in combined assets under management (9/30/07).
TIAA-CREF Individual and Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.
Abby Aylman Cohen, Corporate Media Relations
aacohen@tiaa-cref.org, 212-916-4381
© 2008 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017
