This report on MarketWatch has some troubling statistics about Americans and retirement planning.

“roughly half of all working Americans don’t participate in a retirement plan or don’t have an employer-sponsored plan in which to participate.”

“retirees are living on roughly one-third of their preretirement income. And that’s a far cry from the 70% to 80% income replacement experts suggest Americans need to maintain their preretirement standard of living.”

If the only retirement strategy you have at this point is a plan to live off of social security, you and many other Americans are in big trouble.  With the baby boomers expected to bankrupt the social security system sometime in the next 20 years or so, subsequent generations must be especially cognizant of their retirement planning.

Even people who are actively saving for retirement aren’t saving enough.  Healthcare costs are rising so astronomically it will be difficult to maintain a reasonable standard of living as you grow older. 

However, you still have time before the end of the year to contribute the maximum allowed for both your IRA and 401K plans.  For individuals over 50 years the IRS has a provision to allow you to “catch up” on retirement that allows you to contribute an additional amount over the normal allotment for retirement accounts.

Last week the Internal Revenue Service announced it’s 2008 inflation adjustments to its tax code. A number of these changes will impact how much you will be able to save for your retirement. Generally you will be able to contribute more to your pension and retirement plans than in previous years. However it is also important to note that a number of key figures remain unchanged, including the maximum annual contribution to a 401(K) plan which will stay at $15,500. For individuals over 50, the maximum additional contribution will also remain unchanged at $5,000.

Key Changes

1. “The income limit for the savers credit is $53,000 for joint filers (up $1,000), $39,750 for heads of household (up $750) and $26,500 for singles and married persons filing separately (up$500). Low-and moderate income workers who contribute to a retirement plan, such as an IRA or 401(k), may qualify for the credit, which is available in addition to any other tax savings that apply.”

2. “The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000) and $101,000 (up from $99,000) for singles and heads of household.”

3. “For contributions to a traditional IRA, the deduction phase-out range for an individual covered by a retirement plan at work begins at income of $85,000 for joint filers (up from $83,000) and $53,000 for a single person or head of household (up from $52,000).”

4. “The annual contribution limit for most defined contribution plans rises to $46,000, up from $45,000 in 2007.”

Talk to your financial advisor to discuss how these changes will affect your retirement planning. For a complete list of 2008 inflation adjustments, you can visit the IRS web site.