These are the most common excuses I hear for NOT planning smart for retirement.

Reason #10: “I’m too busy”

I can’t tell you how often I hear this excuse. So many people want to plan for a better retirement, but they don’t have time. They think they’ll take care of it tomorrow or the day after that… and before they know it, several years have gone by. The best advice I can give you is to stop procrastinating and start planning today.

Reason #9: “It’s too soon”

I don’t know how this happened, but many people have adopted the notion that you don’t have to start plan-ning for your retirement until you’re almost there. This is totally incorrect. The truth is, the sooner you start planning, the better chance you stand of having the kind of retirement you want. It’s never too soon. Many people start planning in their early twenties!

Reason #8: “It’s too late”

If you’re already near or past your retirement eligibility date, you may think that whatever you’ve got is what you’re stuck with and it’s too late to do anything about it. Think again. If you’re unsure of what your options are, speak to a professional. Even if you’ve already retired, it’s important to consider how you’re receiving income and how long it will last. It’s never too late to revise your income distribution strategy.

Reason #7: “I don’t need to”

I’ve heard this excuse many times and it always baffles me. Many people think that because they’ve been diligent about contributing to a savings account, they’re all set. While saving for retirement is good, you also need a plan for income distribution once you enter retirement. Are you certain that what you’re saving will be enough? Have you considered your distribution plan? What about taxes? What about inflation? And are you sure your money will be properly invested? There may be other, better options for you and it may prove worthwhile to look into them.

Reason #6: “I don’t have enough money to get started”

This excuse seems marginal at first glance, but there is some truth behind it. You need to have money to save or invest money. However, unless your bills are exactly equal to or greater than your net income, you DO have enough to get started. Starting small is better than not starting at all, and if you plan well, you’ll eventually have more to work with.

Reason #5: “My finances are a mess”

This all the more reason to seek out an advisor who can help you sort through and understand your assets. Perhaps you have a 401(k) or several 401(k)s from former employers that has not been rolled over, a couple of savings accounts, a trust from a deceased relative, some stocks that your parents bought in your name when you were younger … a circumstance like this can be confusing, but leaving it as it is won’t improve the situation. Consider speaking with an advisor who can look at your complete financial picture, help you to understand it, and help you to develop a plan to make your “financial mess” work for you.

Reason #4: “The Government will take care of me”

The bottom line is this … there’s a chance Social Security may not be available when you retire, and even presuming it is, it may not be enough to provide your ideal retirement income. If you’re planning to retire on Social Security alone, I would advise you to create a back-up plan at the very least.

Reason #3: “Between my savings and my 401(k), I’ll be fine”

Saving for retirement without an income distribution plan can be a mistake. How will you use that money once you have it? And while you may think you’ll have everything you’re going to need, have you considered inflation? Taxes? And furthermore, some people are living past 90. Will your assets last that long? If you outlive your income, what then? It’s a good idea to look ahead and plan lifelong income.

Reason #2: “I don’t want to think about it”

Many people procrastinate simply because the thought of discussing financial matters (or growing old) is unappealing. I can certainly understand that. But consider this … if you bite the bullet now and put a firm plan in motion, you may not have to think about it again for quite some time.

Reason #1: “I don’t know how”

If you knew everything there was to know about financial planning, you’d probably be a financial advisor yourself. While it is possible to do everything on your own, that generally involves a great deal of research and a huge ongoing time commitment. If you’re putting off retirement planning because you don’t know how, consider speaking to an advisor at Joshua Cumrine Financial who does.

Most places of employment will offer a variety of retirement plans you can choose to make use of. Two commonly asked questions are whether a Roth 401(k) is the same as a Roth IRA retirement account and is either one better than a traditional 401(k) plan.  While there are significant differences, any type of IRA & retirement plan investing is a great idea; for the past 10 plus years the average American actually had a negative savings rate!

The Roth IRA

A Roth IRA and a Roth 401(k) are two very different savings instruments. Both have the same concept however. Basically, you make contributions to plan for retirement. There are no tax deductions for these contributions. Yet, upon your retirement, you can withdraw your contributions and additional earnings tax-free. While it would be wonderful to have a simple answer to these common questions, one type is not necessarily better than the other. It will greatly depend on your personal preferences and circumstances. The right choice for you will depend on your specific situation and expectations.

The Traditional 401(k)

With a traditional 401(k), the employee will contribute a specified percentage of their salary to a plan that is employer-sponsored. Many companies will make contributions to your account, and some companies will even offer a match of up to 100% of your contributions. No contribution that is made to the traditional 401(k) is counted as taxable income. All of the gains that are accumulated in the account are tax-deferred. Upon withdrawal, the amount is taxed as if it were ordinary income. The traditional 401(k) is similar to a traditional IRA account and account owners will have to begin taking withdrawals at age 70 1/2.

Roth 401(k)

When dealing with a Roth 401(k), the contributions that are made by the employer are kept separate. These contributions will receive the same tax treatment as a traditional 401(k).

A Roth IRA does not have a withdrawal requirement. You will never be required to make mandatory withdrawals from the account. Roth 401(k) accounts do have a withdrawal rule, and owners will be required to begin withdrawing when they reach 70 1/2. One way to avoid the mandatory withdrawal rule is to rollover the Roth 401(k) into a Roth IRA retirement account. Keep in mind that Roth 401(k) accounts are available to every worker, while Roth IRAs have an income restriction.

The Roth 401(k) plan has a maximum contribution limit. In 2009, the limit is $16,500. However, there is a $5,500 catch-up contribution that is allowed for workers who are over the age of 50. Combined, employees can contribute up to $22,000 per year into their account.

Contribution Limits: Roth IRA & 401(k)

IRAs have a very significant difference from a 401(k). With an IRA retirement account, the contribution limits are lower. This is because these accounts are not sponsored by your employer. For 2009, Roth IRA contribution limits are set at $5,000. Employees are allotted an additional $1,000 for catch-up, totaling $6,000 for the year if you are over 50. It is possible to have more than one type of retirement account. If you have an IRA and a 401(k), you can contribute the maximum amount to both accounts. Now, the question remains, what’s better, a 401(k) or a Roth IRA?

Choosing Roth 401(k) or Roth IRA

An analysis conducted by William Urban from Bingham, Osborn and Scarborough, indicates that the Roth 401(k) plan “might be the better choice for more people than commonly understood.”

The popular belief is that a Roth 401(k) makes more sense, especially if you are planning to be in a higher tax bracket upon retirement. The analysis showed that if your tax bracket falls in retirement years, the accumulation in the Roth might make that the better choice. This is usually the case if employees can afford to contribute the maximum amount allowed. Many times, younger workers are in the lower tax brackets. This minimizes the immediate tax benefits of the traditional 401(k), making the Roth fund a better choice. 

Regardless of your decision, going with any tax advantaged savings account is critical to save for retirement. More and more people file for bankruptcy because they did not have a large enough savings when a financial emergency occurred such as a sickness, loss of a job, or death in the family.

In most cases, employees have two choices when it comes to saving money for retirement. They can participate in a company sponsored 401(k) program or they may have the other option of participating in an IRA program.

These plans both involve putting money aside (usually a percentage of your income) into a tax-deferred account, but an IRA works more like a personal savings account than the 401(k) programs. With an IRA, when an employee decides to retire, quit, or change jobs, he or she can receive the money saved in an IRA as one lump sum. This is known as an IRA rollover. What the person does with that money is the key to good IRA management.

One thing you can do with the money is to convert it into a more beneficial retirement account known as a Roth IRA. A Roth IRA allows you to borrow against the balance with fewer restrictions than those imposed on a standard IRA. A company-sponsored 401(k) plan, by comparison, places severe restrictions on employee access to accounts.

You do not have to take an IRA rollover even if you retire or leave the company. In other words, you cannot be forced to take the money out of the account. If you wish, the account can remain with the original company until you reache retirement age even if you are working with another company at the time.

For those who want to move their account, most employees have 60 days from the time of termination to re-invest their IRA rollover into a new account or investment plan. There are some issues associated with this, however, so make sure you get expert advice before deciding on what to do.

All IRA account holders should understand that if they elect to keep their account with a former employer and the company goes bankrupt or hits severe financial problems their money may be lost. Keep in mind that often employers change locations over time, and this can make it hard for you to keep up with where they are (and where your money is). By taking the IRA rollover at termination you can transfer the money directly into a new account, reducing your need to keep up with your past employer’s location and financial state.

As mentioned earlier in this article, IRA rules have a tendency to change often and it is your responsibility to keep abreast of what is new and current. If you find that you are facing an IRA rollover, seek the advice of a professional who can show you the options that you have and help you make the best decision concerning where to put your savings.

There’s a new kind of defined retirement plan on the market, but you may have to ask your employer to add it to your current plan.

In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRAA), which provided a variety of changes, adjustments and extensions to rules for retirement plans to be phased in during the ensuing 10 years. Among those provisions was the creation of the Roth 401(k), a hybrid that allowed contributions of after-tax dollars (like a Roth IRA) through salary deferral up to $15,000 (2006 limit) with a $5,000 catch-up allowed for people over age 50 (like a 401(k) plan.)

Roth 401(k) plans haven’t received much attention in the intervening years because that particular part of EGTRRA didn’t take effect until January 2006. Most employers, according to a survey by Hewitt Associates, have not yet added the Roth 401(k) to their retirement offerings, and only one-third of companies say they are “very” or “somewhat” likely to add it. Those who do, however, find the most Roth 401(k) fans among workers in their 20s, 14% of whom select the new plans when offered, the highest rate for all age groups.

That’s not surprising. Roth 401(k)s operate on the same assumption as Roth IRAs: that those who use them will be in a higher tax bracket after retirement than they are now. Both Roth products are funded with after tax dollars, making withdrawals of contributions and earnings tax free. Traditional 401(k)s and traditional IRAs work the opposite way: dollars are contributed pre-tax or with an attached tax deduction now, and contributions and earnings are taxed upon withdrawal, when the employee expects to be in a lower tax bracket.

In May 2006, Congress eliminated income restrictions, which were $110,000 for individuals and $160,000 for married couples, on conversions from traditional IRAs to their Roth counterparts. This provision, however, doesn’t kick in until 2010—the year the new Roth 401(k)s end. Individuals who earn more than $110,000 cannot open a Roth IRA, although many tax and investment professionals expect the IRS to allow those over the income limit to open Roth IRAs to receive rollovers from the Roth 401(k)s.

If Congress makes no effort to extend the lifespan of the Roth 401(k), those funds will be eligible to roll into a Roth IRA. A rollover may also be beneficial to someone turning 70½. At that age, Roth 401(k) accounts, traditional 401(k) accounts and traditional IRA accounts begin minimum required distributions. A Roth IRA has no mandatory distribution, so the money in them can continue to grow tax-free for as long as you wish—even for the beneficiary of your Roth IRA account.

Like Roth IRAs, Roth 401(k) contributions are subject to a five-year investment requirement, meaning that to receive distributions without penalty, the account holder must be age 59 ½ and have held the account for five years. When rolling funds from a Roth 401(k) to a Roth IRA (or in any other conversion) keep careful records to verify the date you made the contributions so you can establish the base for that five year holding period.

Many factors can affect your personal decisions about traditional versus Roth, and 401(k) versus IRA, including your age, your tax bracket now, your expected tax bracket in retirement, the amount you are contributing, and your ability and desire to pass funds to future generations. An investment professional can help you weigh the pros and cons of each account and contribution type to determine which best meets your needs.

If you are an employer, your investment and tax professionals can help you decide whether adding the Roth 401(k) contribution provision to your plan (a relatively simple and low-cost change) makes sense for you and your employees.

The aging of the population and the potential failing of social security has brought the subject of saving for retirement to the forefront for many people. There are many avenues available to acquire the nest egg that we will need to survive on during our golden years. IRA’s, mutual funds, annuities and 401(k)’s are just some of the options to research as we prepare for our future.

With all of these choices, the 401(k) is the most popular. The popularity of the 401(k) is due in a large part to the fact that many employers not only offer this option, they also match a certain percentage of your contribution. The amount that employers will match varies from as little as 25% to as much as 100%, although the number of employers that do not match at all is, unfortunately on the rise. Another outstanding benefit a 401(k) offers is that the contributions made by you as an employee are made with pre-tax monies.

A 401(k) plan is also very flexible, giving you choices in regards to your investment strategy. There are some tried and true methods for investing in a 401(k) that depend upon your age at any given time. For example, a young person investing in a 401(k), whether the employer matches or not, has time on their side. This person can invest aggressively, if they feel comfortable doing so. The market will have ups and downs, but the younger the investor the more time is available to ride out these fluctuations in the stock market. As the investor nears retirement, it would be prudent to change the investment strategy to a more conservative approach. This will, in theory make investing money “safer.” but still more profitable than a traditional savings account.

In the past, only larger companies were able to offer their employees a 401(k) plan for retirement. A 401(k) retirement plan was simply not an option for the self-employed person. Thankfully, this is not the case in today’s marketplace. Today there is a plan called Solo 401(k) or individual 401(k). These plans allow business owners with no employees, with only partners or a spouse to set up retirement plans that are very similar to the traditional 401(k) offered by larger, more established companies.

If you leave an employer that you have a 401(k) plan with, you don’t need to leave your retirement investing in their hands. You have the option to do a 401(k) rollover, and it is highly recommended that you take advantage of this option. By rolling over a 401(k), you keep control over your investing options, as you should. When a rollover occurs, the money that is in the 401(k) is rolled all together into an approved investment vessel. These include programs such as a SIMPLE IRA, a SEP IRA account as well as another 401(k) to name a few. It is best to speak with a financial advisor who can help you to accurately weigh the pros and cons of each type of investment opportunity that is available to you.

What is almost never recommended is to take out the 401(k) money either all or in part. This is because there will be a 10% penalty on the portion that is withdrawn, if the withdrawal takes place before the age of 59 ½. When a rollover is chosen as a way to deal with accrued 401(k) investment, it should be done as one transaction to avoid any of these penalties or fees.

If you are looking for an investment tool as a way to save for retirement, the first place to look is your employer. Get all the facts from them, find out what they contribute, how much your are allowed to contribute and then speak with a good financial advisor as to what steps to take next.