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Feature Article

This article is part of the Missouri Saves Program

Financial Strategies for Later Life

Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension

Overall we've become a nation of spenders, not savers. The statistics from the Survey of Consumer Finances through the Federal Reserve Board on Retirement Savings of American Households are startling.

In her report, published in 2000, Catherine P. Montalto found that median household retirement assets is just $24,000. Sixty-two percent of households have some retirement assets. That means that 37% of households have no retirement assets. Many people that look forward to a pleasant retirement are just wishing - they're not actively planning for that goal.

A big mistake that some workers make is not participating in workplace retirement plans where the employer offers some matching funds for savings. Some choose not to participate while others don't save enough to get the full advantage of employer match. These employees are basically saying no to free money.

Changing jobs? The most serious mistake participating workers make is to spend their retirement savings when they change jobs. Those with less than $5,000 in a plan are particularly likely to spend the money rather than roll it over into another retirement savings plan. Not only do they end up having to pay taxes on the money they withdrew, but they lost the benefit of interest compounding.

About one-fifth of workers - often those who earn the smallest incomes or work for small employers - do not have access to a pension, 401 (k), or other retirement plan. If your employer doesn't have a plan it may be up to you to set up your own retirement plan. Look for savings instruments with positive tax implications such as a traditional or Roth Individual Retirement Account (IRA) or a U.S. Savings Bond. 





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Last update: Tuesday, May 05, 2009