The Journey: Catching up with retirement savings late in your career

Q: I should have had something in place 20 years ago for retirement. Now at 47, I realize that 67 is not too far away. Any recommendations on financial institutions that could assist me on this delayed retirement?

A. Starting at mid-career does make it harder to save because you’ll generally need to put away a much higher percentage of income to get to where you need to be by retirement age, but it could be a lot worse.

Your biggest wealth lever is still your career, so start thinking about promotions and mid-career retraining to make sure you can work as long as you’ll need to work. And speaking of work, check with your human resources adviser to see if your employer offers any free retirement-planning resources.

If not, think about hiring an hourly, fee-only financial planner. Check out the National Association of Personal Financial Advisers (napfa.org)to get started.

Notice I haven’t recommended a financial institution yet? That’s because getting a few other things in place is more important.

“Here’s a guy who has already blown 20 years and is having regrets. To imagine he will turn on a light bulb and make up for lost time all on his own, I’m a little skeptical,” said Joel Greenwald, a financial adviser with Greenwald Wealth Management in St. Louis Park, Minn.

In a few hours, an hourly planner will likely help you sort out your monthly budget in depth, assess any debt you have and help figure out your best retirement savings vehicle, whether that’s an employer plan, an IRA or a combination, Greenwald said.

Once you get a handle on your budget and debt, then choose a place to park the money that offers ultra-low fees and as much automation as possible to keep it easy to stick with your new savings goals. “Robo-advisers” like Betterment and Wealthfront will help you choose a portfolio based on risk tolerance, but big institutions such as Vanguard and Schwab also offer low-cost options that are easy to track online.

Worried about plowing a lot of new money into the stock market after such a long bull market?

Greenwald looks at it this way:

“He could see significant losses before significant gains, but his time horizon is 40 or 50 years,” he said. “He needs to get off the dime.”

Q: I’m a doctor and recently completed fellowship training. In January, I’ll go from making $55,000 a year to $250,000. I have a 403(b) worth $1,500 and about $20,000 in a pension savings plan earning minimal interest from residency. I’m thinking about rolling the savings plan into a Roth IRA at the institution that administers the 403(b). We have no money to pay extra taxes this year. Will they be automatically deducted when we roll it over or will we owe more taxes in April?

A. Without knowing details about the pension savings plan, I’ll take your word for it that you can roll it into a Roth IRA. Generally, with a long career ahead of you in higher tax brackets, building a Roth IRA makes good sense, said Greenwald, who practiced internal medicine for a decade before becoming a financial adviser. That’s because contributions are made with after-tax income and generally, the money is withdrawn in retirement tax-free.

You will be given the option to have taxes withheld when you make the conversion, or wait to pay them at tax time. Greenwald says to wait and pay them in April on your new attending physician’s salary. Having taxes taken out of the IRA when you convert shrinks your account at a time when you need to be saving.

“I would have them do the conversion in 2015 while they are still in a lower tax bracket,” he said. With more than three months of your new income in hand by tax time, plowing some of that into paying for the Roth conversion is a good way to set the tone for living within your means, he said.

About The Writer

Janet Kidd Stewart writes The Journey for the Chicago Tribune.

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Career, job, retirement