Need to boost retirement savings clearer than ever

Do you plan on working after you're 65? If so, you have plenty of company.

The percentage of people over 65 who still work has been rising since the mid-1990s. In 2000, 12.8 percent of the over-65 segment still worked the highest figure since 1979, according to the Bureau of Labor Statistics.

Several factors are behind this trend, including a ban on most forced retirements, advances in medicine and favorable changes in Social Security laws.

But another reason for the influx of older workers is that many of today's retirees are discovering that the combination of So-cial Security and income from their company's retirement plan is not enough to let them live the retirement lifestyle they had envisioned.

According to a poll by the New York Times, the number of Americans who said they planned to retire later than age 65 rose 20 percent in 2001, up from 15 percent in 1995 and more than half of those who plan to keep working say they will do so for financial reasons.

To achieve sufficient income for the type of retirement you want, you'll need to bolster your retirement savings.

Retirement contributions

If you have a 401(k) or other type of tax-qualified retirement plan where you work, take full advantage of it. Contributions grow on a tax-deferred basis, which means they'll increase much faster than they would if placed in an investment on which taxes are paid every year. If you are self-employed, you also may have a number of tax-deferred retirement account possibilities, including an simplified employee pension-individual retirement account, a savings incentive match plan for employees IRA or a money-purchase pension plan. The details on these plans vary, but for all, is contribute as much as you can afford.

Explore accounts

Even if you contribute to a company-sponsored retirement plan, you may be able to open a traditional or Roth IRA. Like a 401(k), the traditional IRA will provide tax-deferred earnings, while a Roth IRA grows totally tax-free, provided certain conditions are met. Although the annual contribution limits on these IRAs $2,000 per person for 2001 and $3,000 per person for 2002 are not large, earnings can add up over time.

Annuities and life insurance

If an employee has maxed out his contributions to his employer's retirement plan and IRA, he may want to consider purchasing an annuity. Annuities offer tax-deferred earnings growth, plus very high contribution limits. He also can achieve tax-deferred growth through certain life insurance policies, such as universal life.

By following these suggestions, you'll go a long way toward meeting retirement funding needs.

Then, if you do return to work after your formal retirement, you'll be doing so not because you need the money, but for a much better reason because you want to.

(Betty J. Neal, CFP, is an investment representative with Edward Jones in Springfield.)