4 retirement tips for your baby boomer clients
By Andy Raybuck
If you go by the most recent report published by the HSBC Bank, then you’ll notice that the living standard of the baby boomers has dropped considerably during the past seven years. The reason for such a shocking trend has been attributed to their inadequate retirement savings, which they amassed while they were an active part of the workforce.
The report has been prepared following a survey in which approximately 15,000 consumers participated from 15 different markets across the globe. The report has also revealed that the savings built by these baby boomers may last no more than 14 years on average. However, their median retirement duration is found to be 21 years. So, if you want your clients to relax during their golden years, here are some most suitable retirement tips that you may advise them to follow.
1. Take advantage of tax savings
Find out whether or not you are eligible for the Saver’s Credit in order to save money as much as possible. There is a big lack of awareness regarding this kind of tax credit amongst middle- as well as low-income workers. For that reason, very few people have managed to qualify for these tax incentives. If you are contributing to an individual retirement account (IRA) or any other similar retirement plans, then you can qualify for a tax credit of about $1,000 to $2,000. However, this will depend on your adjusted gross monthly income and tax filing status.
Usually, in comparison to tax deduction, it is much better to get a tax credit since it calls for dollar-for-dollar decrease from your taxable income. The Center for Retirement Research, a sister concern of Transamerica, has discovered that most working professionals aren’t aware that such a Saver’s Credit is provided by the Internal Revenue Service (IRS). This is due to the fact that a meager 21 percent of workers with annual income below $50,000 have taken advantage of this tax credit.
2. Make greater IRA contributions
As a part of a definitive retirement plan, you need to hike your IRA contributions. You can now take pleasure in contributing greater amount towards your IRA. This is because the cap or limitation on IRA contributions has been raised from this fiscal year. As a worker under the age of 50, you are allowed to make a contribution of not more than $5,500 towards your IRA. Or, you may contribute $6,500 towards your IRA if you are more than 50 years old. However, if you are planning to contribute even more towards your IRA, then the IRS has no provision to grant you a deduction beyond the set limit. A greater IRA contribution limit ensures higher tax savings. In addition, your spouse can also contribute towards your IRA based on his or her own income.
3. Maximize employer retirement plan benefits
From this year onwards, you are permitted to contribute another $500 towards your 403(b) and 401(k) accounts on top of what the IRS allowed in 2012. As a result, your annual contribution towards these retirement accounts will amount to $17,500, provided you are below the age of 50. This is probably one of the best retirement options you may take advantage of. Alternatively, if you're over 50, then, per the government’s rules, you are allowed to contribute higher amounts towards these accounts. Due to these increments in the limitations, you may end up with $23,000 as savings in a given year, stretching the amount from $17,500. These contributions can be made by federal employees under the governmental scheme of the Thrift Savings Plan. Additionally, private sector workers also come under the purview of these regulations.
4. Try to delay your retirement until you are debt free
Moreover, added years of work will translate into bigger savings. Keeping in view of all the current economic uncertainties, you may well try to pay off your debts before retiring in order to have a better grip over your finances, or else your savings will deplete much faster than you can imagine. This is all the more important because of soaring educational costs and health insurance premiums.