I hear a lot about how more Americans say they will have to work until they die. With as many professionals I know who have been laid off, working seems more and more like a privilege than a curse. Since I work for the extremely unstable media industry, I have had to completely revamp my retirement savings plans. I can't afford to have most of my money tied up in regular IRA or 401(k) plans since I risk paying hefty taxes and early withdrawal fees. I'm still 30 years away from my ideal retirement age of 70. If I'm fortunate enough to have a job for the next 30 years, I'll be extremely well off in retirement. However, that seems like a long shot. I have to make wise financial decisions in case I have a mid-life financial crisis due to a job layoff or other less-than-ideal situation. According to a recent article by CNBC, most Americans with 401(k) plans are building up debt faster than they are saving for retirement. If people are having trouble saving enough money for retirement while employed, what happens for those who are laid off?
Opting for the Roth 401(k)
I completely stopped contributing money to my regular 401(k) plan even though it might lower our tax burden. I rather pay the higher taxes while I'm working. I am contributing instead to a Roth 401(k). If I am laid off, I can easily rollover the money from the Roth 401(k) into my Roth IRA without any negative consequences. I can take out any money I put into the Roth accounts, but I can't touch the interest earned until I'm older.
Retiring on my man's money
Because I'm married to someone with earned income, I can continue to contribute to a "spousal Roth IRA" even if I am no longer earning income myself. Although it would be a last resort to retire on my man's money, it's comforting to have be in a dual-income or even triple-income family when the job market is unpredictable.
Staying out of debt
Another major component of my revised retirement plan is to stay out of debt. If I lose my job, I won't be able to make credit-card or car payments. In the last 20 years, the amount of money 401(k) participants have spend to pay down debts has risen 70 percent. According to CNBC, savers between the ages of 50 and 65 spend 22 percent of their income to pay down debt. I figure if I scale back my lifestyle and put money aside now, I'll be able to weather a job loss.
After watching more than a dozen colleagues lose their jobs in the past several years, I don't take any paycheck for granted. I don't have the luxury of saving money in a retirement plan that does not give me flexibility and easy access. For me, the Roth IRA and the Roth 401(k) plans not only allow me to save for retirement, but allow me to sleep peacefully the 10,950 nights leading up to my retirement.
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