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Boomers: Action Plan If You're 50 and Haven't Saved A Dime

You're 50, recently laid off, and now forced to figure out what work you'll do for the next 15 years or more and how you'll ever retire.

You'd dreamed of leaving your job at 65, vacationing in Tuscany, taking a trip around the world, or perhaps spending your afternoon on the golf course. But the reality is the economic downturn has tripled the number of unemployed wokers ages 55 to 64 over the past two years, compared with a doubling in the overall unemployment rate.

That means right now, for you, Job Number One is figuring out the next career you'll embark on. This is the "new retirement" that many Baby Boomers (born between 1946-1964) must now envision.

The rise in job losses, grim prospects for Social Security benefits, and paltry personal savings has created a situation where many Boomers must put off retirement from the workforce because they simply cannot afford it. Even before the recession, the Congressional Budget Office predicted the Social Security Administration would be doling out more money than it took in by 2020, which would deplete the trust fund and cause a severe cut in benefits by 2043.

While many Boomers are trying to take action—even if it's a little late—most haven't saved nearly enough for retirement. The 2009 Employee Benefits Research Institute found more than one-third (36 percent) of Americans ages 45 to 55-years-old had saved $10,000 or less! Yet, nearly one-quarter (24 percent) of those forty- and fifty-somethings believe they'll need half a million to a million dollars to retire.

The bottom line: You may be working well into your late 60s or beyond. Over a third of the 45 to 55-year-olds admitted that they expect to retire age 66 or older. Boomers have been forced to change their views on retirement over the past decade. Yet, whether you're worried you haven't saved enough or haven't saved at all, there are some concrete steps you can take to boost your retirement nest egg:

Delay Retirement Age

You're likely going to have to work longer than you'd planned. A 50-year-old who is just starting to save will need to save 56 percent of their annual salary to be able to retire at age 5, according to calculations by T. Rowe Price . That's an enormous number and extremely daunting. But if you wait to retire until age 70, that gives you more years to save and fewer years that your savings will have to support you. Also, delaying Social Security until then will give you the maximum benefit, helping to fill in the gap.

Convert and/or Contribute to a Roth IRA

Those who are 50 or older can contribute up to $6,000 in 2010 to a traditional or Roth IRA. (Also, you have until April 15, 2010 to make your 2009 IRA contribution—up to another $6,000). Income limits for funding a Roth are higher than with a traditional IRA. Unlike the traditional IRA, Roth contributions are not tax-deductible. But if you have enough time before you have to start making withdrawals, a Roth IRA is probably the better option.

Withdrawals after age 59 1/2 can be made tax-free (as long as the account has been open for 5 taxable years or more). Starting this year, anyone can convert a traditional IRA to a Roth IRA, regardless of income.

This change applies to all years beyond 2010—and the income taxes due on the 2010 conversion can be spread over two years. So the 2010 conversion amount may be included as taxable income in 2011 and 2012—helping to spread out the tax bite.

Contribute the Max to Your 401(k)

Workers age 50 or older can invest up to $22,000 in their company's 401(k) this year—that's the maximum contribution of $16,500, plus a so-called "catch-up" of up to $5,500. Also consider opting for the Roth 401(k), if offered. It combines features of a traditional 401(k) offered by an employer and the Roth IRA, as contributions are made after-taxes. But the account grows tax-free and withdrawals aren't subject to income tax, as long as you're 59 1/2 and you've held the account 5 years or more. There are no income limits for Roth 401(k)s.

Don't Look for a "Magical" Investment

Boomers "should not be thinking there's something 'magical' they can do with their investments to make up for lost time," says Stuart Ritter, a certified financial planner at T.Rowe Price. Don't put all your money into a gold fund or solar energy stocks, just because their markets are hot right now.

At age 50, Ritter says you should have about 75 percent of your retirement investments in diversified equities (the rest in bonds and short-term investments). Ritter says a Retirement Date Fund or Target Retirement Fund is a good way to put your investment strategy on auto-pilot.

Consider Starting a Side Business

According to a recent client survey by Guidant Financial Group, 80 percent of its new small business clients are between the ages of 40-60.

The recession wiped out trillions of dollars in retirement savings and many excellent workers have been downsized. But this environment has also motivated many Boomers a lot of motivation to evaluate other options and pursue their dream of owning their own business.

Guidant found nearly one out of four of these new business owners are investing $100,000-$150,000 of their own retirement funds into a new business.

That doesn't give a new entrepreneur much time or funding cushion to make up for any losses, but that may not deter many Boomers from striking out on their own.

Watch "Tom Brokaw Reports: Boomer$!", Thursday, March 4 at 9pm ET on CNBC. The program will also air Saturday, March 6 at 7pm ET; Sunday, March 7th at 9pm ET; and Monday, March 8th at 8pm ET.

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