4 reasons to start saving today

Running errands? Remember to prepare for retirement

Still not convinced that saving for retirement is something you need to start doing today? Here are four more reasons.

1 Your retirement may last longer and cost more than you think

Retirement is all about relaxing, having fun, traveling—basically, doing all the things you never had time for when you were working.

That's the good stuff. But during your retirement years you may also find yourself taking care of an elderly parent or wanting to help your grown children with major costs such as buying a home or sending their children—your grandchildren—to college. These kinds of extra expenses could chip away at your retirement savings.

Also, keep in mind that life expectancies are increasing. That means your retirement income may need to last 20 years or more.

2 Much of the money you'll need for retirement will come from your personal savings

Your retirement income will likely come from several sources. Social Security may provide a small portion. A company pension may account for another part. But the largest portion will probably come from your personal savings and investments, including your Boeing Savings Plans and other savings accounts. So your first commitment is to save as much as you can, starting today.

3 Start saving early in your career for maximum moneymaking potential

4 Inflation is eating away at your purchasing power

Even though inflation has been relatively low for the past decade, it shows no signs of going away completely. If inflation stayed at 4 percent per year, in 15 years you would need $180 to equal what $100 buys today. That's why you need to do more than just save money—you need to invest your money so that it keeps pace with or outpaces inflation over time.

Why pretax savings give you a boost

When you contribute to the Boeing Savings Plans, you can choose to save on either a pretax or after-tax basis, or a combination of the two. Generally, your combined pretax and after-tax contributions can't exceed 20 percent of your pay (you may be in a collectively bargained group that has not adopted the 20 percent maximum contribution limit; in that case, the maximum contribution limit is 15 percent).

Pretax savings means you're putting money into your plan account before U.S. federal and state income taxes are withheld. Your current tax bill is reduced because the amount you save lowers your taxable income dollar for dollar (federal tax laws require FICA to be withheld from earnings without regard to any pretax contribution you make). Plus, your money grows tax-deferred until it's withdrawn.

Let's say you make $40,000 a year. You choose to save 6 percent on a pretax basis, which means you're saving $2,400 a year. The U.S. government now figures you're making $37,600—$40,000 minus the $2,400 you're saving pretax. The result? Your income tax bill is less than it would have been if you hadn't contributed to the plan. Compared with saving the same amount on an after-tax basis, your take-home pay is actually higher.

After-tax savings means you're putting money into your plan account after your taxes have been withheld, so your contribution does not reduce your taxable income. But just like pretax savings, your after-tax investment gains grow tax-deferred until you withdraw them.

Pretax savings pay off

The tax benefits of pretax savings are so powerful that you could end up with more money in your pocket than you would if you saved the same amount on an after-tax basis. In the 6 percent pretax example, your $2,400 contribution only "costs" you $1,896 because you've paid $504 less to the government.