Mapping the Road to Retirement

Many people in their prime earning years don’t save enough for retirement. The more you accumulate before you retire, the less you may need to worry about working after you retire to maintain your desired lifestyle. For these reasons, it is important to spend time now developing a “road map” for retirement. Try using these five signposts as guides:

With people living longer than ever before, a sound retirement strategy may provide you with an income stream, indexed for inflation, that can last anywhere from 30 to 40 years. With a 4% annualized rate of inflation, the cost of goods and services will triple in about 29 years. With this in mind, compare the amount of income you receive now to the amount you will need during retirement.

The days of “living off” a pension or Social Security have passed. If you depend solely on Social Security or your pension, you may find your income is insufficient to meet your retirement needs

One way to boost your savings is to set money aside on a regular basis. Stay disciplined and consider adjusting your budget to save more as your financial situation changes.

If your employer sponsors a retirement plan, consider contributing the maximum amount. This can help you take advantage of pre-tax contributions and accumulations on a tax-deferred basis. In addition, many employers match employee contributions – usually up to a maximum percentage. For example, suppose you contribute 10% of your income to your 401(k) plan and your employer matches 50% of your contribution. For every dollar you contribute, your employer adds 50 cents. That's free money!

If you have changed jobs, it is important to wisely manage your 401(k) assets from your former employers. Transferring assets from one employer’s plan to another is relatively simple and can help keep your long-term plan on track.* Your other options include rolling over funds into an Individual Retirement Account (IRA), taking a cash distribution, or leaving money in your former employer's plan.** Whatever option you choose, make sure your short-term decision supports your long-term goals.

Individual Retirement Accounts (IRAs) allow you to save on a tax-deferred basis. Contributions to traditional IRAs may be tax-deductible, and funds accumulate on a tax-deferred basis; however, income taxes are due when distributions from the IRA are taken. On the other hand, contributions to Roth IRAs are made with after-tax dollars; funds accumulate tax free, and no income tax is due when distributions are taken after you reach age 59 ½ and have held the account for at least five years. For tax year 2007, contributions to an IRA, or combination of IRAs, are limited to $4,000 ($5,000 for individuals age 50 or older).

Why not pause now to review your long-term strategies? Talk to one of our Financial Consultants available to help you steer toward your goals. When you reach retirement age, you may have successfully navigated around any bumps on your road to retirement and secured a comfortable financial future. To schedule a complimentary review, simply:

• Call us at 800.328.8797, ext. 6077
• Email us at financial@dcu.org
• Visit us at dcu.org

* Not all plans accept rollovers.
** If your balance is less than $5,000, your former employer may not allow you to keep your money in the plan.

DCU Financial
220 Donald Lynch Boulevard, Marlborough, MA 01752 • 800.328.8797, ext. 6077 • Email: financial@dcu.org
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