BOSTON (CBS) – 70 percent of employers currently offer retirement plans. And of those employers only 52% of workers participated.

More and more employers are eliminating their pension plans. Social Security was never intended to be your only source of income in retirement. Social Security is only going to replace about 40% of your current income. So please heed this warning, you need to be saving more money!

If your employer offers a plan, take advantage of it. If your employer does not offer a plan there are other things you can do.

Consider using an IRA, an Individual Retirement Arrangement, to save for retirement. If you do not have an employer-sponsored plan at work you will be able to deduct the amount you contribute to the IRA. You must have earned income and you are limited to $5,000 unless you are 50 or older and then you can add an additional $1,000 a year. Just an aside, alimony is considered earned income.

The money in the account will grow tax deferred until you withdraw the dollars in retirement. And the government wants you to leave it in there to grow until you are age 59½. Try taking it early and the IRS will slap your wrists with a 10% penalty.

And you must begin to withdraw the money from your account when you reach age 70½. Congress figures they have given you a deal with deferred taxes. You will start to get letters from your IRA provider before you reach age 70 so they can help you start withdrawals.

If you have a non-working at-home spouse (congress made up the term not me), you can also set up a spousal IRA for them.

A young worker should consider using a Roth IRA. With a Roth IRA you use after-tax dollars to make your contributions, but when you withdraw the funds in retirement you will not owe income tax on the withdrawals. You must have earned income to contribute to a Roth and you do not have to withdraw the dollars at age 70½. But as with all the IRAs, you are limited to a $5,000 annual contribution.

Withdrawals from a Roth IRA will be free of income taxes if the owner has held the Roth IRA for at least five years and has attained the age of 59½. With a Roth IRA, you are always permitted to get at your contributions without a penalty or taxes due. You can also use a Roth IRA for a spousal IRA.

If you make the big bucks, you can’t contribute to a Roth IRA. As with all good things, there are limitations. Contributions are phased out for single taxpayers if your adjusted gross income (AGI) is between $110,000 and $125,000 and for married couples filing jointly with an AGI between $173,000 and $183,000.

If you can save $3,000 a year in an IRA for 40 years and if you earn an average of 8%, (it can happen), you would have close to $800,000 in your nest egg,


You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.

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