These four simple questions will help identify gaps in your retirement planning know-how.
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Even if finances are tight right now, contributing to your 403(b) or 457 plan is a smart move. The younger you are, the more years you have to take advantage of tax-deferred compounding, since taxes won't be due until you start taking distributions in retirement. (Premature distributions may be subject to a 10% penalty.) Plus, automatic payroll deductions can make saving practically painless.
You could need 100%. Although many financial experts recommend having 70% to 80% of your pre-retirement income to maintain your current lifestyle when you retire, that may not be enough. If you plan to be more active in retirement than during your working years – such as traveling frequently, pursuing hobbies or starting a new career – you may require 100% or more of your pre-retirement income. In addition, health care expenses are likely to eat up a large part of retirement income.
You can contribute up to $16,500 to a 403(b) or 457 plan in 2011. If you’re 50 or older, you can make an additional catch-up contribution up to $5,500, or up to a total of $22,000.
True. If you have both a 403(b) and 457 plan available in your district, you can choose to sign up for both and contribute up to the maximum to both plans. In addition, anyone with earned income can open and contribute to an IRA at a financial institution.
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