Making Retirement a Reality

Your 40s are a critical age to assess the progress you've made on the road to retirement and how much further you need to go.

If you've been building your retirement nest egg throughout your working years, you may find yourself on autopilot by the time you reach your 40s. If you review your asset allocation and find it continues to reflect your goals, staying on course might be all you need to do at this point.

But if you're in your 40s and are not sure you are saving enough for the future, it's important to act now—to think about when you'd like to retire, how much income you'll need in retirement and how much you'll need to save to meet your goals. (Visit Mutual of America's Retirement Calculators in the 'Your Retirement Center' section of mutualofamerica.com today.)

Make Retirement Savings a Top Goal

With all the other demands on your paycheck, including housing costs, transportation costs and daily living expenses, it may be tempting to skimp here. But every year that you delay either contributing or increasing your contributions to your retirement plan may significantly reduce your income once you are done working.

As the table below highlights, increasing the amount you contribute may make a substantial difference in your future standard of living. During 2009 you can generally contribute up to the maximum salary deferral limits allowable under your employer's retirement plan. At the very least, consider taking advantage of any company match in your employer's plan—that's additional money you shouldn't pass up.

This hypothetical example is for illustrative purposes only and does not represent any actual investment performance, price or yield. This illustration assumes a beginning balance of $50,000 and has a constant annual rate of return of 6% compounded monthly. Monthly compounding is for this hypothetical illustration only. Actual compounding can be made on a bi-monthly, weekly or daily basis. Investment returns are not guaranteed and your actual return may vary significantly from that shown.

Pay Off Those Credit Cards

If you make minimum payments each month on credit card balances, you're giving away potential retirement savings directly to your credit card company in the form of interest. Apply as much money as possible to your credit card balances every month, and once they're paid off, resolve to pay the balance in full each month. You'll be amazed at how much money it frees up for retirement savings over time.

Get Creative About College Costs

As a parent, you want to give your children a good start in life. But don't sacrifice your own future by taking on more college debt than you can easily repay. After all, four years at some colleges could cost more than $100,000.¹ Before you stop or reduce contributions to your retirement plan, keep in mind that your retirement plan is not included in financial aid calculations. That should help you as you explore which colleges offer the best packages of financial aid, grants and scholarships.

Consider a Roth IRA*

If your adjusted gross income falls below the threshold established by the IRS, you can contribute to a Roth IRA in addition to your retirement plan. Unlike the pre-tax contributions to a traditional IRA, contributions to a Roth IRA are made on an after-tax basis. Just like a traditional IRA, however, you will pay no current income tax on earnings or interest on your contributions.

Better still, once you have your account for more than five years and you reach age 59½, any distribution from your Roth IRA will be completely free of federal income tax. Unlike a traditional IRA, you are not required to take mandatory distributions from your Roth IRA at age 70½. Learn more about the Roth IRA, including what constitutes a "qualified distribution," today.

Connect with Mutual of America

The longer you wait to get serious about saving for retirement, the harder you'll have to work at it. Regardless of your age, don't let doubt or discouragement keep you from starting right away.

Mutual of America offers products and services to help you plan for your retirement and meet your long-term financial objectives. A Participant Account Representative will work with you one-on-one to review your options, answer your questions and provide you with information that can help you make the most of your retirement plan. Schedule an appointment today by contacting your local Regional Office or calling 1-800-468-3785.

*Important Information About the Roth IRA

Mutual of America's Roth IRA is a variable accumulation annuity contract and is issued on form 3814-IRA, with a Roth endorsement, or a similar form/endorsement specific to your state of residence. This contract does not provide additional income tax deferral advantages beyond those available in a Roth IRA. Mutual of America's Roth IRA is suitable for long-term investing, particularly retirement. The value of a variable accumulation annuity contract will fluctuate depending on the performance of the Separate Account funds you choose. At redemption, your account balance may be greater or less than the principal amount you invested.

Withdrawals of earnings prior to age 59½ are generally subject to a 10% federal tax penalty, but certain exceptions apply.

Return to top |  Print