Your in your 50s and  haven’t saved a dime for retirement, but you have a job – Don’t panic.  You still have time to make up some ground.  It will require you to make significant changes in your lifestyle now, but they certainly won’t be as painful as the changes you would have to make if you continue to put it off.  Any financial planner will tell you that its never too late to start.

You have to start by saving.  And that doesn’t mean just cutting out your daily Starbucks, that means saving, at the very least, 10% of your gross income.  You can do this one of two ways: First, you can pay down high-interest debt that isn’t already tax-deductible – namely credit cards.  Or, you can just start socking funds away.

Make sure to take full advantage of the tax codes (see your CPA or financial adviser) when putting your funds away to maximize your return.  Take full advantage of your company’s 401(k) plan in which contributions are excluded from  your current year’s income.  Investments in such retirement funds grow tax-deferred until they are withdrawn.  If your company does not offer a 401(k), open an individual retirement account at a mutual fund company or brokerage.  If you don’t  have an employer pension plan, you can put away up to $6,000 pre-tax each year.  You can also fund tax-advantaged retirement savings with a second job or side business.  Starting a side business is a good way to maintain income into your retirement as well.  You may be able to put your earnings into a special savings plan for the self-employed.  As for investing your retirement funds, if you are not well versed in the options, you should speak with an experienced financial adviser to help figure out how and where to invest.

The biggest disadvantage you have to starting your retirement savings late is that you lose out on what would have been compounding interest in the previous years.  But even if you are in your 50s, you are still going to be able to take advantage of compounding interest on your investments.  Since retirement is estimated to last upwards of 20 years, your investments will still compound and may even double (at a rate of 5%, investments are estimated to double in 15 years).  So if you you haven’t started saving yet, now is as good a time as any.

The most current statistics have pointed that having saved $1 million is still not going to be enough for retirement in the years to come.  With that in mind, there are still more ways that we can save our hard earned dollars:

1)  Take required minimum distributions – Those ages 70 1/2 or older must take required minimum distributions from retirement accounts each year.  The withdrawal amount is calculated by dividing you individual retirement account and 401 (k) balances by your life expectancy, as determined by the IRS.  The penalty for failing to take out the correct amount is a 50% tax penalty, plus income tax on the amount that should have been withdrawn.

2) Spend your taxable accounts first – You don’t have to pay income tax on the money in your 401(k)s & IRAs until the money is withdrawn; Many other types of accounts with gains are taxed annually regardless.  You should talk to your financial planner about spending money outside your retirement accounts first and setting up a withdrawal plan to minimize your tax burden.

3) Delay signing up for social security – You can begin signing up for social security benefits at age 62, but that does not mean that you should.  Benefit checks are actually cut 20-30% for those who claim their checks before what the Social Security Administration deems the full retirement age.  Soon-to-be retirees (born between 1943-1954) must wait until age 66 to claim their full entitlement.  For those born after 1954, the age gradually increases, culminating at 67 for those born after 1960.

4) Travel smart –  While you are working, you are generally forced to make your travel plans over weekends and over holidays, but when you retire, you will have the luxury to travel during the week and during off peak times.  You should take advantage of this.

5) Find age related tax breaks – Some states exempt pension income from state income tax.  Other locales offer age-related property tax exemptions or deductions.  You should contact your local CPA to see if you qualify for any of these credits.

Very few Americans are saving enough to finance a 30 year retirement.  Because of that, they are left with two choices: learn to survive on a lower income or delay retirement.  There are some frugal strategies that can help you stretch your retirement nest egg though:

1) Downsize your home – Once your kids move out of the house, there is no reason for you to own a multiple bedroom house in a great school district anymore.  Any financial planner will tell you that its not the mortgage, its the maintenance.  This will allow you to pad your nest egg with the money you are saving on upkeep.

2) Get rid of a vehicle – Eliminating your commute is probably one of the best perks to being retired.  Couples may longer need two vehicles when they are not traveling to separate offices.  This will, again, save on maintenance and insurance premiums.

3) Sign up for Medicare on time – Seniors can sign up for Medicare during a 7 month period beginning 3 months before their 65th birthday.  Fill out the application right away to avoid the Medicare Part B premium increase of 10% for each 12-month period of delayed enrollment.  Seniors who are still working and receive health insurance through their employer after age 65 need to enroll within 8 months of leaving the job to avoid penalty.

4) Find the BEST Medicare Part D prescription drug plan – Every year, the premiums, deductibles, and cost-sharing provisions of Medicare Part D prescription drug plans change.  Retirees should go to medicare.gov and compare expected out of pocket cost for necessary drugs under all the plans available in their area.  You are able to switch plans once a year during the open enrollment period.

The best plan is always to seek the advice of a financial planner and work with him/her to determine what you may expect to spend throughout your retirement and come up with the best saving and spending plan that works for you.

CPA Rockville – Its tax refund time!  For many people, this is largest chunk of change, outside of a paycheck, that they will get all year.  Before the economy took a turn, this was the money people would use to splurge on a vacation, a new pair of shoes, or a very small meal for a very large price.  But now, even though we are told the economy is beginning to recover, we must be practical with this money.

First, you should consider re-building or building your emergency fund.  If the last two years have taught us anything, its that unexpected things can happen: job loss, loss of income from investments, or unexpected expenses popping up at an inconvenient time.  It is generally a good rule of thumb to keep 3-6 months of expenses tucked away in a secure place to give you the financial wiggle room that would prevent you from scrambling to stay afloat.

Second, if you already have an emergency fund, you should consider repaying high interest debts.  Credit cards are prime candidates.  By applying your refund to these debts, you are eliminating additional amounts spent on interest in the future.  The money that would have gone to principal and interest payments each month could then be invested for your future.

Third, and finally, if you have your emergency fund set up and have made a dent in your credit card/high-interest debt, you should think about investing your refund.  If you don’t already have a diversified portfolio, it is a good idea to think about building one.  Making a plan with a financial planner in Rockville and discussing your retirement is a good way to begin.

CPA Rockville – Want to stay ahead of the health care “side car” bill?  Here are a few things to keep in mind:

1) Watch for coverage changes.  If you’re uninsured and have health problems, you may become eligible for a new federal high-risk insurance pool this year.  Watch for information at http://www.hhs.gov.

2) Find a doctor now.  There could be shortages, as the reconciliation bill is ultimately expected to add 32 million people to the insured population.

3) Consider long-term care coverage.  Under the new provision, a new voluntary long-term care benefit that would pay cash out to people who become disabled will become available.  You will only get the benefit if you have paid premiums into the program for at least 5 years, and this probably will not become available until 2011 at the earliest.  Again, watch for info at http://www.hhs.gov.

4) Plan ahead for new tax rules.  There will be a new 10% levy on indoor tanning services starting in July.  Also, a $2,500/year cap will be placed on allowable contributions to a tax-free flexible spending account in 2013 (it was 2011 in the original Senate bill).

5) Prepare for Medicare changes.  Beneficiaries who pay for drugs in the doughnut hole coverage gap are eligible for a $250 rebate in 2010.  In 2011, that group will get 50% off brand name drugs, and after that the hole will get a little smaller each year, and should effectively be zeroed out by 2020.  In 2011, certain preventive care will be free as well.

6) Be prepared to be insured by 2014.  If you are uninsured, by 2014, you will likely be required to have insurance or pay a penalty.  You should start preparing yourself now for that additional cost in your budget.  Contacting a financial planner in Rockville now, may help you be ready by then.  Medicaid is going to be expanded to include lower incomes.  For those who make less than $43,000/yr, there will be government assistance to help buy a plan.

Rockville, Maryland – Contrary to popular belief, estate planning is not just for the elderly; it’s a necessity for people of all ages, especially those with children.  Not only do you need to determine who will care for your children in the event that you are unable, the people you choose must be willing to do so, and it must all be well documented in writing.  Once this decision is made, you can start thinking about your property and your possessions.

An estate plan is a living document that will grow in volume as you and your family advance in life.  Just as your financial planner in Rockville encourages you to revise your financial plan on an annual basis, your estate plan should be reviewed and revised as needed.  There are a number of basic steps for a solid estate plan, but are by no means inclusive of the entire process.  Each step your chosen estate planner in Rockville goes over with you is important to address at each of the different stages throughout your life.