Retirement Planning
Retirement Basics
When planning your retirement, it is important to remember that money, more than any other factor, will dictate most of your retirement decisions. Your level of financial preparedness for your retirement years will determine when you retire, what type of lifestyle you and your family will enjoy during retirement, and what might be left as a legacy to your heirs.
IRA Alternatives
There is a wide variety of tax-advantaged ways for individuals to save for retirement. Because of their income tax benefits and because IRAs are so easily established, they have become one of the most often used retirement savings vehicles available today. Recent tax laws, however, have created three very unique types of IRAs – the Traditional IRA, the Non-Deductible IRA and the newer Roth IRA.
IRA Conversions
If you have existing retirement assets in a traditional IRA, you may want to consider converting those assets to a Roth IRA. Possible benefits of converting include tax-free distributions at retirement, no required minimum distributions at age 70 ½, and leaving income tax-free assets to your heirs in the event of your death.
Retirement Expenses
In order to plan realistically for the future you need to have a clear understanding or what money you need when you retire. This will include the cost of living and special activities you will have. It is estimated that you will need to replace 60% to 80% of your pre-retirement earnings in order to keep the standard of living you have had thus far.
Early Retirement
Historically, most Americans have considered 65 to be their target retirement age. This is likely the result of past Social Security laws which allowed for a full benefit beginning at age 65.
Workers today, however, are retiring at earlier ages than in years past. In just the last few years, for example, the average age for retiring has dropped to age 63. And many younger workers are planning on retiring even earlier.
Retired -- Now What?
Most qualified retirement plans offer significant tax benefits for those willing to follow a few IRS specified rules. The government wants to make these plans (401(k)s, Keoghs, SEPs and traditional IRAs) available for specific needs, and has established tax law to help eliminate potential abuses of these tax advantaged investment alternatives.
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