Smart retirement moves at any age

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Start saving for retirement early
Investing and saving approaches can shift based on how far you are from retirement. These tips can help you stay on track at each stage in your life.
From the Merrill Edge Minute e-newsletter.

Key points

  • Saving even small amounts while you're young can pay off years later due to the power of compounding
  • As you get older and gain more financial responsibilities, continue to save, even though it may become a challenge to balance your long- and short-term goals
  • As your retirement draws near, clarify your vision of how you'd like to live when you retire to make sure you're on track
  • Find out if you're on track for retirement with our Personal Retirement Calculator
It's never too early to plan for retirement, and of course the simplest advice — save as much as you can! — holds true at every age. But changes in your financial circumstances and goals from your 20s through your 60s will affect both how you go about saving and investing for retirement, and how you prioritize along the way, says Debra Greenberg, director, IRA Product Management at Merrill Lynch. Here are some age-specific tips to help guide you as you plan for your future retirement, no matter how soon it is or far away it seems.
Select your current age group for relevant tips and suggested next steps.

In your 20s...

When you're young and just starting out, saving for a retirement that's three or more decades away may not feel like a priority. And you might have other goals, like saving for a home or paying off college debt, that seem to stand in the way. "Try to find a way to do it anyway," urges Greenberg, since it may be even more difficult to find the cash to save later on. But perhaps most important, thanks to the power of compounding, investing even a small amount during your 20s has the growth potential to pay off in a big way over the next 30 or 40 years.
Starting early can help you save more for retirement
Source: Merrill Lynch Wealth Management, Retirement Strategies group. This example is hypothetical and does not represent the performance of a particular investment. Results will vary. Actual investing includes fees and other expenses that may result in lower returns than this hypothetical example.
These tips will help you get started:
  • Find the cash. If it's tough to start saving because you feel like you're barely managing your rent or possibly student loan payments, "look at your monthly spending habits and think about ways to free up cash," suggests Greenberg. Sacrificing small luxuries can add up to big savings when spread across an entire year.
  • Automate your savings. Sending a portion of your pay straight into a retirement account can remove spending temptation and may help you stick to your savings goals. It's easy to do if you enroll in a workplace retirement plan, like a 401(k), if your employer offers one, or set up automatic transfers from your bank account into an Individual Retirement Account (IRA).
  • Reach for the match. If your employer offers a retirement plan that matches your contributions, consider stretching to contribute at least enough to earn the full matching amount. That match is like getting an instant return on your investment and like getting extra pay from your employer. And remember, too, that before-tax 401(k) contributions reduce your current taxable income, potentially reducing the taxes you pay, making your contributions that much easier to swallow.
Next steps

In your 30s...

At this stage, you're probably beginning to face more financial demands. But whether you're saving for a home or possibly starting a family, your 30s are still critical saving years because investments you make now for retirement still have 25 or more years to grow. Take a serious look to determine, are you saving enough for retirement? If you decide you're not, consider these steps to close any gaps.
  • Ramp up your savings rate. As your income climbs, make an effort to gradually boost the amount you contribute to your workplace retirement plan or IRA, suggests Greenberg. Put as much as you can toward your workplace plan — the maximum allowed, if possible — or if you don't have a workplace plan, or if you've contributed the maximum amount allowed, try to contribute the maximum amount to your IRA. And bear in mind, contributions to either can reduce your current taxable income (though with a traditional IRA, this is only the case if you are within the modified adjusted gross income limitations for making deductions).
Small increases in your retirement contribution can have a large impact
  • Consider a spousal IRA. If you're married and you — or your spouse — aren't working, you may be able to put as much as $5,500 a year into a spousal IRA. You can contribute even if the working spouse participates in a retirement plan at work, though there are modified adjusted gross income limits that may affect whether you are eligible to contribute to a Roth IRA and whether you can deduct contributions to a traditional IRA.
Contribution limits for investors younger than age 50
Aim to increase your retirement contributions up to the maximum allowed in your 401(k), IRA or other retirement plans.
Maximum contributions for 2017
Traditional2 or Roth IRAs $5,500
401(k)s $18,000
For 2017, the contribution deadline for IRAs is 4/18/18 and for 401(k)s is 12/31/17.
Next steps

In your 40s...

This might be the most challenging decade in which to save for retirement. That's because your financial responsibilities tend to intensify even though you're likely to be earning more than ever. Current financial responsibilities — such as a mortgage or rent, car payments, and possibly saving for your child's college education or caring for aging parents — may make it difficult to balance long- and short-term goals. These tips may help you stay on track.

To help you make room in your budget for retirement savings, this might be a good time to revisit your spending to make sure there aren't areas you'd like to trim.

— Debra Greenberg,
director, IRA Product Management, Merrill Lynch

  • Reconsider your contributions. If you're doing well financially, bump up your retirement plan contribution level. If money is tight, rather than deciding to stop all contributions entirely, consider scaling down the amount you save and try to contribute at least enough toward your workplace retirement plan to receive the full company match, if your company offers a match. That match is like getting an instant return on your investment — and like getting extra pay from your employer.
  • Add an IRA. Already hitting the maximum with your workplace retirement plan contributions? Don't stop there. If you don't qualify for tax-deductible contributions to a traditional IRA, you may be able to make after-tax contributions of up to $5,500 to a Roth IRA or a non-deductible contribution to a traditional IRA. Use our IRA Selector Tool to determine which type of IRA may be best for you.
  • Consider seeking professional advice. As the complexity of managing your assets grows, a Merrill Edge Financial Solutions Advisor™ could help you navigate a path toward your multiple financial goals with personalized advice and guidance.
Next steps

In your 50s...

These are likely to be your peak earning years, and retirement is now close enough to start feeling like a reality rather than an abstraction. So it's important to maximize your retirement contributions while starting to think through your future plans and needs. These tips may help you stay on track.
  • Assess your vision of retirement. Start to really bring your retirement picture into focus. "Think through details like where and how you see yourself living — and, if you're married, make sure your ideas mesh with your spouse's," says Greenberg. Once you agree, you can determine whether you're financially prepared or need to step up your saving.
  • Play catch-up. There are some steps you can consider if you think you have a retirement savings shortfall. Currently, tax laws allow those age 50 and older to save up to an additional $6,000 a year in their workplace retirement plan (though whether this is available is dependent upon your plan's terms) and an extra $1,000 in a traditional or a Roth IRA. Try stretching to take advantage of these higher contribution limits.
Annual contribution limits for 2017
The maximum retirement contribution allowed increases when you reach age 50.
Contributors age 50 and older
401(k)s = $24,000 IRAs2 = $6,500
For contributors younger than age 50, the maximum annual 401(k) contribution is $18,000 and the maximum annual contribution for IRAs is $5,500.
  • Check your investment mix. With generally just 10 to 15 years to go until retirement, you should look at whether your mix of equities and fixed income investments aligns with your investment time horizon. As they approach retirement, many investors revisit their portfolio and transition to a progressively less risky allocation of equities, cash and bonds as they seek to balance the way they pursue growth and manage risk.
  • Consider long-term care insurance. Long-term care insurance gets more expensive as you get older, so this may be a good time to review your options and decide whether it's right for you. Take time to consider how you might plan now for the cost of health care in retirement.
Sharpen your focus on retirement

With retirement drawing near, it's more important than ever to make sure you're on track financially.

Next steps

In your 60s...

While you're likely to still be working and contributing to retirement savings accounts, this is a time of careful planning for your transition into retirement. "The main consideration is how you'll transition away from accumulating wealth toward using it to cover expenses," says Greenberg. These tips might help.
  • Calculate retirement costs. Try to quantify the specific expenses you'll face in retirement. Be sure to include the cost of health care, which continues to rise faster than inflation and tends to hit retirees the hardest.
  • Figure out your future income. Strategize about how your retirement "paycheck" (Social Security, pensions, retirement accounts and any other savings) will come together to meet your needs. You may find it helpful to review your current asset allocation and your investment mix to accomplish this. "If you're looking for income for life, consider an annuity at this point," says Greenberg, as "annuities offer a guaranteed3 stream of income in exchange for a lump-sum investment."
  • Determine when you'll start taking Social Security. Develop a Social Security and retirement date strategy: You'll be eligible to collect Social Security as soon as you turn 62, but your monthly benefit amount gets larger every year you wait to begin, up to age 70, says Greenberg. Visit to see how delaying your Social Security benefits will affect your payments.
Delaying social security benefits until age 70 can have a major impact
Source: "When to Start Receiving Retirement Benefits", Social Security Administration, January 2017.
  • Consider consolidating accounts. If you have multiple 401(k)s from previous employers, you may want to review your choices. You can move to a new employer's plan if you are still working, leave in the old plan if that is an option, roll the assets to a traditional IRA or a Roth IRA or take a distribution. You may want to consolidate those assets by rolling them over into an IRA.5 Doing so may make it easier to keep track of your investments and simplify required minimum distributions (RMDs) when they begin.
  • Revisit your portfolio regularly. Even after you retire, you'll still need to keep an eye on your investments and consider withdrawing from your various accounts in the most tax-efficient way possible. Continuing to monitor your investment portfolio and manage your spending during the decades to come will help ensure that your savings see you through retirement.
Next steps

1 Dollar figures are rounded to the nearest hundred. This illustration assumes a salary of $75,000, contribution rates of 6, 8 and 10% with contributions made at the beginning of the month and a 6% annual effective rate of return. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Taxes are due upon withdrawal. Withdrawals prior to age 59½ may also be subject to 10% additional tax.

2 A traditional IRA also offers tax deductible contributions, if you are eligible.

3 Guarantees are based on the financial strength and claims-paying ability of the insurance company issuing the annuity.

4 Full Retirement Age is the age at which a person may first become entitled to full or unreduced retirement benefits.

5 You have choices for what to do with your employer sponsored retirement plan. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth, roll over to an employer sponsored plan from a prior employer to an employer sponsored plan at your new employer, take a distribution or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment and provide different protection from creditors and legal judgments. These are complex choices and should be considered with care. Visit or call a Merrill Edge rollover specialist at 888.637.3343 for additional information about your choices. Did you know that there are two ways to move assets from one IRA to another? The most common is a transfer. This is when you transfer assets from an IRA held at one financial institution to an IRA at another. You may directly transfer assets between investment firms as frequently as you wish. The second, less common approach is called a rollover. Rollovers occur when you withdraw assets from an IRA and then "roll" those assets back into the same IRA or into another one within 60 days. IRS rules limit you to one rollover per client per twelve month period. If you have questions or want to learn more call 888-MER-EDGE or consult a tax advisor.

This material should be regarded as general information on Social Security considerations and is not intended to provide specific social security advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.