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Hope for the holidays: For best financial results, prepare for the worst

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The old axiom suggests that we should “hope for the best and prepare for the worst.”

For instance, when I prepare a holiday meal, complete with turkey and stuffing, mashed potatoes, gravy, sweet potatoes and a pumpkin pie still warming in the oven, I always have my favorite Chinese restaurant on speed dial as an emergency backup plan.

Hope for the best, and prepare for the worst. There are few better places to put these wise words to use than in retirement planning. Sadly, recent reports show that too few Americans have done their preparations.

Some facts

Data from a 2012 review by Fidelity Investments have brought us to a number of disturbing conclusions, but the most glaringly evident is the apparent fact that most American workers appear ill-prepared for retirement. While this may not seem like news in the wake of the 2008 recession and the resulting years of anemic economic growth, the staggering inadequacy of personal savings warrants a closer look.

At its highest level since record-keeping began, the average employee's 401(k) account balance stands at approximately $77,000, which is certainly insufficient to support an individual for many years in retirement who may have been accustomed to earning a $50,000 income annually.

The numbers look a little less disheartening for those aged 55 and older who have saved into the same 401(k) plan for 10 consecutive years, with an average savings of roughly $243,800. Even though this may seem no paltry sum, consider the fact that retirement with this little nest egg will garner, assuming a 4 percent withdrawal rate and an unwillingness to raid principal, only $9,752 annually. This is certainly no recipe for a retirement rich with travel and other capital-intensive endeavors.

The average 2012 contribution to these plans stood at a measly $2,733, which is far less than the contribution limit of $17,500 allowed for those younger than 50. All signs seem to point to a necessary increase in savings into these sorts of plans to allow for longer, more financially stable retirements for America's employees.

Data amassed in 2011 by the Federal Reserve suggest that the median household with a person age 60 to 62 at the helm has less than one-quarter of the savings necessary in retirement plans to continue the current standard of living. Most of these folks have made the difficult decision to postpone retirement later than they had originally planned.

Save early, save often

While many employers and key employees take advantage of exotic savings arrangements or benefits plans which may not be available to every employee, the 401(k) plan, easily the most ubiquitous company-sponsored retirement savings vehicle for American employees, is by definition accessible to nearly all full-time employees. Because of this, most individuals can utilize these fantastic plans quite easily.

Why don't you?

If you aren't currently contributing to your 401(k) plan, you are certainly not alone. According to a report by the New York Fed, 35 percent of eligible employees choose not to participate in the 401(k) plans available to them. The statistics show that participation in these plans rises with income, age, job tenure and education, which seems to say that the older, wizened, smarter employees are contributing.

Don't be a dummy, I say, and consider contributing!

Need a few more reasons? Here are two.

1. Company match

If you offered to give me $100 under the stipulation that I would have to guarantee to give you back $200 immediately, we certainly couldn't make a deal. But many employers are offering exactly this deal to their employees with a company match in their 401(k). While the match isn't always dollar-for-dollar, any percentage match offered is an additional percentage by which your income is being increased and for simply agreeing to save toward your own retirement.

2. Tax benefits

It is no secret that traditional 401(k) savings are deferred from taxation by not being taxed as income when they are earned and saved into the plan, but fewer folks know that Roth 401(k) options are now readily available within many company-sponsored plans. This offering matters quite a bit to those employees whose incomes are above the IRS limits that would disallow them from saving into a Roth IRA on their own.

Roth IRA savings are limited to $5,500 a year for individuals younger than 50, with an additional catch-up contribution of $1,000 a year for those 50 or older. But if your income is above the limit, this option may not be available for you. If you have a Roth 401(k) available to you, those income limits no longer apply.

Moreover, the individual Roth IRA savings limits don't apply either. The Roth 401(k) allows for a maximum annual salary deferral into the plan of $17,500 if you are younger than 50, and those 50 and older are allowed an additional $5,500 savings into it annually.

Just two more reason to consider saving for your own retirement.

Anthony M. Conte is managing partner at Conte Wealth Advisors with offices in Camp Hill and Fort Myers, Fla. He has a master's degree in financial services and is a certified financial planner. Email him at

Registered Representative Securities offered through Cambridge Investment Research Inc., a broker/dealer, member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors Inc., a registered investment adviser. Cambridge and Conte Wealth Advisors LLC are not affiliated.

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