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21-09-2012 02:29 Mary Morrison was strangled to death in July 2011.

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It's never too early to create a retirement plan, but before you dive in, make sure the water is clear. Retirement investing takes careful planning to get the results you want. With a few simple tips you can start to make the most out of your plan.

Tip 1: Budget

Every solid retirement plan starts with a concrete budget. Budgeting allows you to determine the amount of money you can contribute and save inside and outside of your retirement plan. Budget calculators are a useful way to determine your expendable monthly income and the amount you have available for savings. The amount you contribute to your 401(k) plan is largely dependent on your available savings.

The percentage you contribute to your 401(k) can be loosely determined by age. According to Linda Gadkowski of Beacon Financial Planning, in your 20s you should contribute 10% of your income. In your 30s, contribute 15% of your income toward retirement, and in your 40s, around 20%. However, if possible, you should always contribute the maximum amount allowed by the Internal Revenue Service.

Tip 2: Get a full match

To make sure you're getting as much out of your 401(k) as possible, get a full match. Employer 401(k) plans often contribute 50 cents of every dollar you contribute, up to 6% of your income. To get a full match, you should contribute at least the percentage that your employer is contributing. For example, if you make $50,000 a year and your employer is contributing 50 cents of every dollar at 6% of your income, they will contribute $1,500. You will contribute the full 6% of your income, which is $3,000.

However, contributing more than the match is always a good idea for extra savings and tax breaks. See how much money you'll save in your 401(k) plan with our 401(k) savings calculator.

Tip 3: Max out your 401(k)

To reduce your income taxes and save more money, max out your 401(k). The IRS determines the maximum amount of money you can contribute to your 401(k) on an annual basis. For 2012, the maximum is $17,000.

Contributing the maximum amount of money to your 401(k) reduces federal income taxes and most state taxes. If you make $50,000 a year and contribute the $17,000 maximum, you'll only be taxed on federal income for $33,000. State income taxes vary.

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Three Tips for Early Retirement Investing

MINNEAPOLIS--(BUSINESS WIRE)--

More than half of Americans say candidates positions on Social Security and Medicare are very likely to impact their vote during the upcoming election but debate over the future of these programs doesnt appear to be prompting an increase in personal retirement savings. In fact, the number of U.S. consumers who report making financial preparations for retirement has fallen to 70%, the lowest level in three years, according to a retirement readiness index released today by Ameriprise Financial (AMP). The New Retirement Mindscape 2012 City Pulse index examines the 30 largest U.S. metropolitan areas to determine where consumers are the most prepared for and confident about retirement and also tracks national and local retirement trends over time.

Hartford-New Haven (#1), San Diego (#2) and Minneapolis-St. Paul (#3) claimed the top three spots on the third annual index while Washington D.C. (#30), Charlotte (#29) and Indianapolis (#28) ranked lowest. Metropolitan areas were scored based on responses to a national survey that measured consumers likelihood to have determined the amount of money they need to save for retirement and their actual saving habits. The index also takes into account if people report planning for a variety of activities during retirement and express confidence about achieving their retirement goals.

While the majority of Americans we surveyed express positive feelings about retirement, were still seeing a significant lack of confidence in fact, nearly half admit theyre concerned about outliving their savings, says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. The economic environment surely contributes to this uncertainty, but with proper planning, people can regain a sense of financial security and confidence in the future.

Financial preparedness elevates top ranked metros

Several things set apart the top ranked metros. Residents of Hartford-New Haven, San Diego and Minneapolis-St. Paul are significantly more likely to say they are making financial preparations, including setting aside money for retirement, determining how much they need to save and consulting with a financial advisor. Perhaps as a result, they are also much more likely to feel on track and financially prepared for retirement.

In top-ranked Hartford-New Haven, three-quarters (75%) of residents say theyve set aside money for retirement, compared to 63% of people nationwide. Nearly half (49%) report feeling on track for retirement the most of any metro and a sentiment expressed by significantly fewer consumers across the U.S. (37%).

However, despite the efforts theyve made from a financial standpoint, residents of these areas are only on par with the rest of the nation with regard to planning for the activities theyd like to pursue during retirement a fact which may leave them less prepared than they actually feel. In fact, in third-ranked Minneapolis-St. Paul, where residents report the highest levels of financial preparation, a mere 18% say they have given a lot of thought to where they might live in retirement and how they plan to rest and relax.

While the story isnt as positive for the bottom ranked metros, it may not be as grim as it initially seems. Indianapolis and Washington D.C. are on par with the national average with regard to financial preparation, while Charlotte scores just slightly below. However, residents of these metros report a significant lack of confidence in their ability to reach their retirement goals.

Significant differences and regional trends noted in this years rankings

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Retirement Readiness Lacking in Some of America’s 30 Largest Metros

SEATTLE, Sept. 19, 2012 /PRNewswire/ -- Report published by Stratford Retirement informs caregivers and elderly about financial options for assisted care.

While Americans continue to live longer than ever, often well past traditional retirement years, there is a growing concern about the ability of Medicaid to cover long-term care cost. What has traditionally been a safety net for middle-income people with assisted care needs, has now turned into a contested political topic.

StratfordRetirement, a licensed memory care and assisted living facility in Seattle, often advises caregivers about the costs associated with long-term care, whether it be in a nursing home, an independent living facility, or at home. Based on their experiences, the staff has releasedareport, free to everyone, that helps the elderly and their loved ones make educated choices about how to pay for assisted care.

Titled "Paying for Assisted Living - A Guide for Seniors and Loved Ones," the report covers the multitude of payment alternatives available to families. It includes information on long-term care insurance, government programs, Aid and Attendance Veterans Benefits. It also includes information about taking advantage of life settlements and home equity.

Assisted living facilities typically offer condominiums or apartment-like housing to senior adults in need of help with everyday tasks. These tasks may include grooming, cleaning, dressing, or even eating. In spite of this extra care, residents of assisted living facilities generally don't require extensive nursing - although this often turns into a need later in life. One of the benefits of assisted living communities is that the expense, or monthly rent, is usually much lower than that of a nursing home.

For seniors who have been living independently for decades, navigating their financial options in this new world may be overwhelming. Many Americans assume Medicare will pay the complete cost of senior housing. The report explains why this is not often the case. Assistance from Medicare is very limited. Although Medicaid typically only covers nursing care, each state sets its own regulations on how funds are distributed.

This report also covers costs associated with memory care, also known as dementia care or Alzheimer's treatment. Memory care is considered a specialized type of assisted living, and the cost structure and payment options are often similar.

Caregivers and families that want to download this report free of charge should head over to: http://stratfordassisted.com/assisted-guide/

About Stratford Retirement

The Stratford at Maple Leaf is a recognized retirement facility that offers Independent, Assisted Living, and Memory Care all under one roof in Seattle.

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Free Stratford Retirement Report Helps People Make Affordable Assisted Living Decisions

When we're laying the groundwork for our retirement plans, many of us spend hours noodling on optimal asset allocations, withdrawal rates, and income-replacement rates.

But another metric tends to receive far less scrutiny even though it's a far bigger determinant of whether we can retire when and how we'd like to: how much of our income we're able to save while we're working.

I recently surveyed Morningstar.com users about their own savings rates. Posting in the Investing During Retirement forum of Morningstar.com's Discuss forums, I asked readers if they had stuck with the old rule of thumb and saved 10% of their salaries, or if they had nudged their own savings rates higher. I also asked them whether in hindsight their savings rate was too high, too low, or just about right?

Responses, not surprisingly, ran the gamut, and many posters noted that they hadn't saved a fixed percentage throughout their pre-retirement years. Rather, many readers said that they saved somewhat half-heartedly in their younger years, then kicked up their savings rate aggressively when they started to get "real" about retirement, often in their 40s and 50s. "I wish I had started saving more aggressively earlier on!"--or some variation of that statement--was a frequently echoed refrain. To read the complete thread or share your own retirement-savings rate, click here.

'I Have Been Making Up for Lost Time'Although some readers advocated for a flat savings rate, many posters noted that their savings rate trended up as they aged, no doubt the result of a confluence of factors, including higher absolute levels of income, which makes it easier to save, and a greater sense of urgency about retirement, which naturally increases as we age.

The savings pattern laid out by Keith999, who expects to embark on a financially secure retirement soon, will ring true for many investors. "In my 20s I spent, in my 30s I spent more, then in my 40s began saving about 6% of salary, early 50s about 12%, and the last 10 years I/we saved 20% of two salaries. The last 10 years probably represent over 50% of the total saved and indeed has put us over the top of what we need."

ColonelDan's savings rate moved up in stairstep fashion: "I managed to save/invest 5%-10% of my early meager military pay; 10%-15% of military pay in the latter half of those 24 years; 20%-25% of my regular civilian salary plus 100% 401(k) catch-up amount, 100% employer's 401(k) match, and 100% of all bonuses."

Cterry notes that increasing one's savings rate as retirement approaches can have the salutary effect of preparing a pre-retiree to live on a lower income during retirement. "The advantage to ramping up savings so much in the nine years before I retired was that I didn't have to worry about 'Some advisors recommend 90%-100% of current income for retirement--do I need that much?' because I already was living on 70% of my gross."

Playing catch-up is the name of the game for many pre-retirees. For FidlStix, running the numbers on in-retirement income needs was a wake-up call. "About eight years ago I did my first estimate of how much income I might need during retirement. That was a shocker. I was 10s of thousands [of dollars] behind where I needed to be at that point. Since then, I have been making up for lost time. I jumped my percentage of salary saved to 22% including a 5% company match. I also started a Roth IRA five years ago, contributing about 10% additional on average. My total saved this year will be about 38% counting the Roth."

'I Was Finally Able to Really Do Some Saving'Family matters also figured heavily into many posters' savings-rate patterns. Not surprisingly, many readers noted that helping to defray college costs for their children had put a strain on their savings, but with college over, they were able to sock much more away. Juris2 wrote, "I've saved a bit more since my kids ended college in 2003 when I started a supplemental retirement account (SRA). I'm currently putting about 25% per year in my retirement account and SRA combined, including employer contribution, as I approach retirement in two years. (Almost all savings accumulated beyond the RA and SRA were wiped out by college costs for my kids.)"

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How much did you save for retirement?

Most of us could always stand to put a few more bucks into our retirement accounts. After a decade of lackluster returns for stocks during the 2000s, you may well have a lot of catching up to do in saving for retirement, and even the raging bull market of the past three-and-a-half years hasn't brought major market averages back to their pre-financial crisis levels. Given that Social Security is under siege and company pensions are rapidly becoming a thing of the past, what you save for yourself is definitely the most reliable source of funds you can count on after you retire.

Yet there's an even bigger reason that now is the best time to start finding ways to funnel more money into tax-favored retirement accounts like 401(k) accounts and IRAs. With the looming fiscal cliff just months away, the incidental tax benefits that retirement accounts provide could get a whole lot more valuable.

The worst-case scenarioWithout government action, a whole bunch of bad things are about to happen to your taxes. Let's take a look at the three basic categories of higher taxes that you may face:

1. Higher taxes on ordinary income are coming.Without a tax law change, income tax brackets across the board are going to go up. Although most of the attention has focused on the impact on the rich of higher brackets, the changes could potentially affect anyone who pays tax.

At the beginning of 2013, current law provides for the lowest existing tax bracket of 10% to go away, reverting to 15%. That could add $870 to the tax bill of married couples with incomes roughly in the $20,000 to $70,000 range. And obviously, adding three percentage points to the current 25%, 28%, and 33% tax brackets would produce a big hit on higher-income taxpayers as well. Although both parties have talked about agreeing to the need to renew tax breaks on low- and middle-income taxpayers, it hasn't happened yet.

The more you put in a deductible IRA or 401(k), the less taxable income you'll have. With tax rates rising, the savings you'll get from contributing to a retirement account will also increase.

2. Higher taxes on investment income are coming.The elimination of tax breaks on dividend income and the rise in long-term capital gains rates, while investment focused, will be costly for many taxpayers. Right now, those in the 10% and 15% brackets pay nothing in tax on qualified dividends, but that will rise to 15% in 2013 with no changes to current law. Those in higher brackets will lose the 15% limitation and pay whatever their higher rate is, up to 39.6%. That will eliminate the current penalty that investors in non-qualified dividend payers, including mortgage REITs Annaly Capital (NYSE: NLY) and American Capital Agency (Nasdaq: AGNC) , have to pay -- but only by raising the rest of the playing field to match the higher rate.

For years, dividend stocks have attracted new capital. But the new rules will make it more important than ever to shelter dividend income inside a retirement account. In particular, on high-yielding stocks Frontier Communications (Nasdaq: FTR) and Windstream (Nasdaq: WIN) , which have yields of 8% to 10% and whose dividends are generally eligible for lower tax rates, you could end up paying more than two-and-a-half times as much in taxes as you do now in a regular account. In an IRA, by contrast, you'll save more of your hard-earned money and let it work harder for you during your career.

3. Excess taxes for high-income taxpayers are coming.In addition to old tax law coming back to bite taxpayers, new increases are also on their way. Medicare withholding will rise by 0.9% once wages rise above certain limits -- $200,000 for most singles and $250,000 for joint-filing taxpayers. Also, a 3.8% surtax on investment income will apply to high-income taxpayers, making it that much more important to get high-yielding dividend stocks under cover of a tax-favored retirement account.

Get your money protectedTo reduce your taxable income and therefore your tax bill, IRA and 401(k) contributions are one of the most effective things you can do. The sooner you get money into those accounts, the better off you'll be -- and even if the fiscal cliff somehow gets fixed, you'll still have done a lot to make your retirement that much more secure.

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3 New Reasons to Beef Up Your Retirement Accounts

Dear Tax Talk, My husband and I are in our early to mid-70s. We have two children with special needs who are not self-sufficient. We have about $620,000 in a defined benefit plan, and we receive about $9,000 per month in pensions and Social Security, not including the defined benefit plan. The $9,000 will be reduced by about half when the first of us dies and will be about $3,000 when the remaining spouse dies.

We just moved to New York from California, where we sold a house that we bought for $300,000 in 1985. It sold for $2 million after closing costs. There was a $700,000 mortgage, leaving us with about $1.3 million. We know we have the $500,000 exclusion of gain, plus we put about $500,000 into remodels over the years, so our cost is $1.3 million. Our taxable gain will be $700,000, so we will be paying about $105,000 (15 percent) in federal taxes and $70,000 (10 percent) in California taxes. This leaves us with $1.1 million to buy a house in New York.

We want to buy an apartment that we will be happy in. We spend a lot of time at home and entertain a lot. If you can imagine, the apartments in Greenwich Village that we love are not very nice in the $1 million range. So our business manager suggested we put a small amount into a mortgage, so we can afford $1.3 million, a price at which we would be able to find something we like.

I am an actor, well thought of, and my husband is a playwright whose play is being done on Broadway this year with a major star, so he will probably make about $1 million before taxes. We have made very little over the past 10 years, but we love it here in New York and are doing well. But I am not making any money.

In addition to a house, my greatest concern is my kids. I think the apartment will be a good investment to leave for them, but also I feel we need second-to-die insurance and long-term care insurance. So I worry. Can you help? -- Margaret

Dear Margaret, The help to your question may very well reside in your question. Your business manager should be the person on top of planning for your children's future. If he can't do it, then he needs to find the right qualified professionals.

While second-to-die and long-term care insurance are great products, they're also best purchased at a younger age. These products also involve high commissions to the broker that sells them, obviously creating a conflict of interest in their recommendation. At this stage in your life, these products may not make economic sense for you or your dependent children.

If your husband is making up to $1 million this year from his play, you may want to consider additional contributions to the defined benefit plan. While an individual retirement account has an age limit for contributions, a defined benefit plan does not necessarily have to have an age limit.

With respect to the home sale, you have California taxes due on the sale. The same applies for New York and your husband's earnings. You may want to consider paying those taxes prior to the end of the year to make sure they're deductible. That is, anyone owing state income taxes should consider getting a prepayment in for the year to ensure the tax deduction.

Your CPA should prepare a tax projection to see what makes the most sense to pay to maximize your deductions and minimize any late-payment penalties. The projection should also be mindful of the alternative minimum tax. I hope this helps answer some of your concerns.

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Planning for retirement, special-needs children

Retirement! For many, the very word conjures up images of freedom an escape from the demands and drudgery of work; a chance to travel and pursue much neglected avocations; and the time to really enjoy the company of family and friends.

Retirement is supposed to be an exciting new stage of adventure and self-determination. Unfortunately, the reality is both different and much more complex.

In two groundbreaking studies, Ameriprise Financial, a major U.S. financial planning firm, found that retirement is not an end state but more of a series of separate and foreseeable stages through which people move. Understanding and planning for the challenges posed by this odyssey can improve the odds of having a successful journey. Here are the six stages:

Imagination

This stage occurs anywhere 6 to 15 years before the planned date of retirement. People begin to envision being retired even while they are busy with other priorities such a launching their children and paying down their mortgages.

Generally speaking, their outlook is optimistic and enthusiastic, even adventurous, as a picture of retirement begins to form in their minds.

Hesitation

In Ameriprises original study in 2005, this stage didnt exist. However, their 2010 study found that a new stage of worry and hesitation emerges 3 to 5 years before retirement, a consequence of the market meltdown during the global credit crisis.

With retirement approaching, people begin to worry about their preparedness and many begin more detailed planning, often with a financial advisor. The question will we have enough becomes paramount.

Anticipation

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The odyssey of retirement planning