Look ahead Keys to retirement planning

By Paul C. MacDonald

II/ITH the aging of the baby V V boomer population, retirement planning has come to the forefront of most people's attention.

The realization that social security will provide only a small fraction of what the average worker will need to retire comfortably and that the age to receive full benefits has increased, only adds to the attention being given to this area. Couple this with the fact that many Americans have lost a significant portion of their savings in the stock market over the past several years, and suddenly there is a great urgency to retirement planning. Fortunately, Congress passed laws recently giving workers added incentives to save for retirement, and many employers have adopted retirement plans.

Even if ers an incentive to contribute to the plan. The employee's contribution is always 1007o vested, but the employer's contribution typically has a vesting schedule, which is the period of time an employee must be employed before the money becomes theirs.

With the realization that 401(k) savings may not be enough, many of my clients have decided to implement plans for owners and senior management that allow them to legally discriminate against the rank and file employee, and contribute an amount substantially higher than the amount allowed by the 401(k) plan. These plans are called non-qualified executive compensation plans, and the design can be custom tailored to fit each company's needs, as well as the needs of each executive. The contributions may or may not be taxdeductible, growth is usually taxdeferred, and withdrawals may be designed to be taxable or income taxfree.

You

can only start with a small contribution, start saving.

There are many different options when it comes to retirement savings. For employers, the most common plan is the 401(k) plan, which allows an employee to set aside up to $12,000 per year for retirement, with a catch-up provision for those over age 50 allowing for an additional $2,000 annual contribution. Many companies match a portion of the employee's contribution to give work-

If your company has a 401(k) plan, I strongly recommend taking advantage of it. If the company has a matching program, at a minimum, contribute the amount necessary to take full advantage of the match, since this is equivalent to receiving free money.

Companies may also offer a profit sharing plan along with the 401(k), which can increase the amount set aside for retirement up to as much as 25Vo of compensation. or $40.000. although most plans are not that rich. There are several different profit sharing designs, allowing ownership to choose a plan that may favor a certain class of employee-usually those earning higher salaries or who are closer to retirement age. These also have a vesting schedule.

The message is clear that retirement isn't far away, even if you are only in your 30s, and that the time to begin saving is now. Even if you can only start with a small contribution, start saving. The habit of saving will continue to grow and before you know it, your account will have a substantial amount of money in it. You do not want to wait until your 50s or 60s, and then be faced with the prospect of either working longer than you want to or retiring with a lifestyle less than what you desire.

- Paul C. MacDonald is a chartered lifu underwriter and chartered financial consultant who specializes in working with businesses in the areas of insurance, benefits, estate and retirement planning. He is a qualifiing member of the Million Dollar Round Table, putting him in the top 6Vo of insurance professionals worldwide. He may be reached at (949) 2522652.