February 11, 2010

What to do when your client is screwed?

Your client is 50, laid off and hasn't saved a dime (okay, if this is really the case he probably isn't your client, but stay with us). He's now forced to figure out he'll do for the next 15 years or more and how he'll ever retire. This is the case study recently proffered by the folks at CNBC, and it caught our eye. We sincerely hope your client's situation isn't this dire, but even if not, the following refresher can help make a bad situation better.

Delay Retirement Age-You're likely going to have to work longer than you'd planned. A 50-year-old who is just starting to save will need to save 56 percent of their annual salary to be able to retire at age 5, according to calculations by T. Rowe Price.

Convert and/or Contribute to a Roth IRA-Those who are 50 or older can contribute up to $6,000 in 2010 to a traditional or Roth IRA. (Also, you have until April 15, 2010 to make your 2009 IRA contribution--up to another $6,000). Income limits for funding a Roth are higher than with a traditional IRA.

Contribute the Max to Your 401(k)-Workers age 50 or older can invest up to $22,000 in their company's 401(k) this year--that's the maximum contribution of $16,500, plus a so-called "catch-up" of up to $5,500.

Don't Look for a "Magical" Investment-Boomers "should not be thinking there's something 'magical' they can do with their investments to make up for lost time," Stuart Ritter, a certified financial planner at T.Rowe Price, told CNBC. Don't put all your money into a gold fund or solar energy stocks, just because their markets are hot right now.

Consider Starting a Side Business-According to a recent client survey by Guidant Financial Group, the network reports, 80 percent of its new small business clients are between the ages of 40-60.

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