7 Excuses for Not Saving for Retirement (U.S. News & World Report)

There are plenty of excuses we make for not saving for retirement. Perhaps we are putting off funding a retirement account until we get a raise, get out of debt, or start a college fund for our children. But while these justifications might seem reasonable at the time, they can seriously jeopardize your ability to retire comfortably. Here's how to overcome seven common excuses for not saving for retirement:

[See How to Save for Retirement on a Low Income.]

Earn too little. It's extremely difficult to save for retirement on a small wage, and you probably have other more immediate expenses demanding your limited paychecks. However, starting out by saving even very small amounts will help you significantly in the future. "If you take just $10 a month and then increase it to $20 a month after six months, you probably won't miss it," says Kimberly Foss, a certified financial planner and president of Empyrion Wealth Management in Roseville, Calif. "Each year when you get a pay raise or cost-of-living increase or bonus, take half of that amount and put it into your retirement plan." Also, take advantage of savings perks specifically for low-income individuals who save for retirement. If you contribute to an IRA or 401(k) when your modified adjusted gross income is less than $28,250 ($56,500 for couples) in 2011, you may qualify for the saver's tax credit, which could reduce your federal tax bill by up to $1,000 for individuals and $2,000 for couples. Also, consider funneling some of your retirement savings into a Roth 401(k) or Roth IRA. Roth accounts allow you to pay income tax on your retirement savings now, while you are in a low-tax bracket, then withdrawals will be tax-free in retirement.

College first. Parents sometimes delay saving for retirement so they can pay for their children's college education. But most financial advisers caution against sacrificing your retirement savings to fund a 529 plan. "Children can borrow to go to college, but you can't borrow to retire," says Patricia Raskob, a certified financial planner and president of Raskob Kambourian Financial Advisors in Tucson, Ariz. You can always help your children to pay off their student loans later if you end up in a better financial position. A 401(k) match from your employer is likely to be the best possible return you can get on an investment. "When you are saving in a company plan like a 401(k), you are actually saving even more money because of the pre-tax benefit and you are also usually getting a matching contribution," says Carole Peck, a certified financial planner and owner of the Carole Peck Financial Center. "You don't have a match for saving for a college education and you don't necessarily have an immediate tax benefit, either." You may also be able to get relatives to chip in for your children's college costs. "Enlist people like the grandparents who, instead of giving them a $50 present at two years old, can put $40 in a 529 plan and give them a $10 gift," advises Foss. "Have other people fund 529s while you save for retirement."

[See Saving for College Versus Retirement.]

Retirement is far away. With so many immediate expenses clamoring for our limited paychecks, it's difficult to focus on a financial goal that could be decades away. But starting to save early means that you can save less each year and still reach the same goal. "Look at the long-term growth potential for starting in your 20s as opposed to starting in your 40s," says Peck. If you save $2,500 per year in a 401(k) beginning at age 25, you will have $517,808 at age 65, assuming a 7 percent annual return. However, if you wait until age 40 to start saving, you will need to save about $7,900 per year to have the same amount for retirement at age 65.

No retirement plan at work. It certainly makes saving for retirement easier if you receive help from an employer. "Seek out an employer, if you can, that has a 401(k) and matches your contributions or helps you to save for your retirement," advises Foss. If you don't receive any employer help, it's even more important to save for retirement on your own. You can defer taxes on up to $5,000 by saving in an IRA, or $6,000 if you are age 50 or older. Consider setting up a direct deposit from your paycheck to a retirement or taxable investment account to make saving as automatic as it would be if you had a 401(k).

Don't know how to invest. Picking funds can be intimidating if you don't know much about investing. If you don't feel comfortable selecting an investment allocation yourself, make an appointment with an independent expert who can explain it to you and recommend choices appropriate for your situation. "Get on the phone with somebody who is objective and spend a little bit of time walking through it," says Peck. If you don't like your initial investment choices, you can always change them later.

Pay off debt first. If you have high-interest credit card debt or personal loans, it's usually a good idea to pay those off before funding an IRA. But if you have student loans, mortgage payments, or other low-interest debt, you may be able to get a better return by investing your cash. To figure out if it's better to pay off debt or save for retirement, compare the interest and fees you are paying on your debt to how much you are likely to earn on your savings. Be sure to factor in any 401(k) match and tax deductions or credits you will earn by saving for retirement.

[See Retirement Savings Strategies for Late Starters.]

It's too late. Some people in their 50s and 60s think it's too late to begin saving for retirement. But depending on when you plan to retire, you may have a decade or more to accumulate a nest egg. There are significantly bigger tax incentives for older workers to save for retirement than younger workers. Workers age 50 and over can contribute $5,500 more to a 401(k) and $1,000 more to an IRA than younger workers are allowed to. "In your 50s, you still have a good 10 or 15 years to contribute to a retirement plan, even if you haven't started already," says Peck. "It's better to start than to rely only on Social Security or your kids later on."

Twitter: @aiming2retire

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Saving Ourselves From Gambling (The Motley Fool)

You've probably heard that the FBI swung its fist last week, shutting down a handful of online poker websites. "The sites have been operating in a legal gray area for years," says my colleague Travis Hoium. Others (particularly the FBI) disagree, billing this as outright crime.

At any rate, the raids highlight an issue we've been having for years: Should online gambling be outlawed, or legalized and taxed?

The argument against gambling is that it is addictive, bad for your financial health, and inflicts harm on society. This is undoubtedly true to some extent, but I pulled a few statistics to put the criticism in perspective:

A Harvard Medical School study found that 1.3% of Americans have a gambling disorder. Meanwhile, about 3% of the population is classified as morbidly obese; 21% smoke cigarettes; 7.4% meet the clinical standards for alcohol abuse or alcoholism.A 1999 study by the Treasury Department analyzing more than 30 years of data found "no measurable effect of gambling on personal bankruptcy rates." Most of those who went bankrupt because of gambling debt likely would have eventually done so without casinos. They're just bad at handling money. Meanwhile, nearly 1 million bankruptcies directly related to medical bills occur every year, 78% of which happened to people with health insurance.Estimates vary, but most studies conclude that Americans lose a net $50 billion a year from legal gambling. AIG (NYSE: AIG - News) alone lost about that much in 2008.The dot-com crash last decade erased 100 times as much wealth; the recent financial crisis destroyed 300 times as much ($15 trillion) in a matter of months.

The argument doesn't have to be that gambling is safe. It's not. But compared with other perfectly legal ills we put up with, it isn't half bad.

Then there are the fringe benefits of gambling. The casino industry employs 375,000 people nationwide. The American Gaming Association notes that this is "more direct employees than the U.S. automobile industry, software manufacturers or wireless phone carriers." For more perspective, Apple's (Nasdaq: AAPL - News) iPod, "a nearly ubiquitous device, has created 13,920 jobs in the United States, including engineering and retail," according to economist Tyler Cowen.

And don't forget taxes. Nevada has no state income tax, in part thanks to revenue it collects from gaming tax. Pennsylvania uses gaming tax revenue to reduce state property taxes. It's telling that Prohibition was overturned in 1933 largely thanks to a pamphlet issued by the Association Against the Prohibition Amendment titled, "The Need of a New Source of Government Revenue."

But the debate over online gambling is more a moral discussion about when something should be outlawed. Blowing wads of cash on stupid stuff is an American pastime. To each his or her own. Something only needs to be banned when it causes collateral damage to those who don't want to be involved. The financial crisis is a good example. You may have never even heard of a naked credit default swap, but you may have lost your job -- and your stock portfolio almost certainly took a hit -- because of them. The actions of a relatively small number of bankers inflicted hell on every inch of the global financial system. That's when you need strong regulation.

Adam Smith, the godfather of free-market capitalism, agrees:

"[E]xertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed."

Gambling is different. No one can play an online poker hand so large that its failure will double the unemployment rate, add $5 trillion to the national debt, or send the stock market down 60% -- as the financial crisis did. Mistakes are contained to those who voluntarily step up to the plate. There's an argument to make that gambling addictions do harm innocent family members, but the same is true for dozens of other legal activities. It all comes down to widespread collateral damage. Compare the 2009 chaos caused by the near-meltdowns of Bank of America (NYSE: BAC - News) or Citigroup (NYSE: C - News) with that of MGM (NYSE: MGM - News). It's night and day, which makes it hard for me to justify the rationale for banning online gambling.

What do you think? Share your thoughts in the comment section below.

Fool contributor @TMFHousel. Apple is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a bull call spread position on Apple. The Fool owns shares of Apple and Bank of America. Through a separate Rising Star portfolio, the Fool is short Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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5 Ways to Make Saving for Retirement Easier (U.S. News & World Report)

Retirement saving is a crucial part of our personal finances. But with so many more immediate needs and wants, it is difficult to allocate resources to a retirement that could be decades away. Here are five ways to make it easier to save for retirement.

[See 10 Places to Go Carless in Retirement.]

Create a tangible benefit. Most people think of retirement as a number, such as a dollar amount they need to reach or a monthly income goal. Instead, think of the lifestyle that you are saving up for. Translate the savings goal into what you will actually do. Is golfing every day or seeing more of your kids and grandchildren your dream? These goals should be your motivation to save. No one wants to save money just to reach a certain number, but everybody will work hard to get to do the activities they dream of.

Make it automatic. One of the best benefits of saving in a 401(k) is that the money never enters your checking account. When you don't see the extra money you learn to live with that smaller paycheck and the savings will rack up over time. Even if you don't have a 401(k) at work, make sure you pay yourself first.

[See The 5 Worst Ways to Save for Retirement.]

Use your budget as a guide only. Some people allocate a percentage of their income to save for retirement and then use the rest for expenses. As a result, many people end up spending all their discretionary income each month. Instead, monitor your spending and think about the value that you are getting from every purchase. You might find that you can save quite a bit more money if you cut out things you don't need or enjoy. Having a budget is a good start, but also work on improving it.

Make more income. There are a variety of ways you can reduce your monthly expenses so that you can save more. But once you have eliminated all the expenses you are willing to cut, making more money is probably a better way to boost your savings. The more you make, the easier saving money is, as long as you don't inflate your lifestyle when you get raises. As your income grows, aim to live well without spending a lot of money.

[See 5 Reasons You Shouldn't Contribute to a 401(k).]

Create a plan and execute it successfully. Having a plan and watching your nest egg grow can give you an incredible sense of achievement and satisfaction. Once you create a solid retirement plan and begin hitting your savings goals every month, it becomes a powerful motivator to save even more.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

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Why Saving For Retirement Isn't Enough (U.S. News & World Report)

The basic rules of personal finance are simple to understand: Spend less than you earn, save for the future, and repeat the process. In principle, it sounds easy. But there is more to retirement planning than just saving whatever you have left over at the end of the month. Here are several other important ways to prepare for retirement.

[See 10 Places to Go Carless in Retirement.]

Pay yourself first. If you don't make saving a priority, you probably won't save enough to finance a comfortable retirement. Treat investing like a bill and set up an automatic contribution plan through your employer or investment firm. If you don't make saving automatic, you risk not having any money left over at the end of the month to save.

Set up an investment plan. Simply shoveling money into a savings account won't give you the growth you need to keep up with inflation. Part of your investment plan should include a well balanced investment portfolio that is designed to cope with the highs and lows of the economy and keep pace with inflation.

[See 5 Costly Retirement Investment Mistakes to Avoid.]

Leverage the investment tools available to you. Many Americans have access to an employer-sponsored retirement plan, such as a 401(k), 403(b), the Thrift Savings Plan, or a variety of small business retirement plans. These retirement accounts offer tax advantages now, give you the benefit of investment growth without the drag of taxes, and often come with a matching employer contribution, which is essentially free money for your retirement. You should make it your goal to maximize any available matching contributions. If you don't have an employer-sponsored retirement plan, consider opening an IRA, which also offers great tax benefits and flexible investment opportunities.

Invest outside of retirement accounts. You don't have to limit your investments strictly to retirement accounts. Investing for cash flow is a great way to enhance your standard of living now or prepare for retirement in the future. You could invest with dividend stocks, Real Estate Investment Trusts (REITs), or bonds at discount brokerage firms. Alternatively, you could purchase real estate and collect rent. Both of these options require work, but they could also help you retire earlier and with a higher standard of living than you may otherwise experience.

[See 5 Reasons Your 401(k) Isn't Enough for Retirement.]

Control debt. You won't be able to save for the future if you have more going out every month than you have coming in. Debt is a tool which can be leveraged for useful purposes, but left unchecked, it can bring financial ruin. Work on eliminating any debt you may have. Once it is gone, do your best to prevent it from returning and becoming a part of your lifestyle. If you're looking to cut some debt, go for the big wins first, such as lowering your mortgage payments. Also, consider transferring your credit card balance to a 0 percent balance transfer credit card, which will eliminate your credit card interest for a set time frame. These money moves can free up hundreds of dollars each month, which can be used to accelerate your debt repayment and then to increase your standard of living or savings plan.

Ryan Guina is a U.S. military veteran, writer, and professional in the corporate world. He blogs at Cash Money Life and The Military Wallet.

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