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Saving in today’s economy

Posted: March 1, 2010 10:33 p.m.
Updated: March 2, 2010 4:55 a.m.
 

In today’s tough economy, many Americans are facing new choices. Purchases we used to think nothing of making are now carefully considered.

A recent article in U. S. News & World Report stated, “Americans are in a gloomy mood. Polls by Gallup show that about half of Americans have cut spending, and one-third plan to cut back permanently. That would mark a consumer revolution.”

“We haven’t seen this before,” said Dennis Jacobe, chief economist for Gallup. He also stated, “It is the only time we have seen this since the Great Depression.”

What does this mean for your saving for retirement? It means take control with a budget.

One way to maintain a comprehensive picture of your finances is to follow a budget. It gives structure to your money-management tasks and can help you identify what is working and what is not in your personal balance sheet.

Don’t shortchange your future. When finances are tight, it’s tempting to focus on immediate needs and shortchange your long-term goals.  

One item that should always be part of your budget is saving for retirement in your employer’s retirement plan, or your personal IRA or private pension plan. By saving in the plan or plans, you get advantages that simply are not available elsewhere.

Three good reasons to keep participating in your retirement savings plan are:
1. You save on current taxes. Your contributions are deducted from your income before you pay taxes, which may reduce your federal taxable income.

2. Your account grows tax deferred. Your earnings are not taxed until you withdraw them. This gives your account the opportunity to grow faster than it would if your contributions and earnings were taxed every year.

3. It’s easy. Your contributions are deducted for you in your employer plan, and if you have an IRA or private pension, you take the deduction when filing your taxes.  

This way you stay focused on the big picture. A tough economy magnifies the importance of saving for a financially secure future, and making retirement savings plan contributions a priority.

Looking at the big picture when deciding how to spend your money can help you keep your retirement savings strategy working for your future.

Remember, “No one plans to fail; only some fail to plan.”

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.

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