On the Road to Retirement
People don’t plan to fail; they just fail to plan. On the road to retirement, that saying is particularly true. That’s because some pretty significant events will happen throughout your lifetime, and many of them will tempt you to put your retirement savings on hold. But stalling your retirement savings can keep you from ever arriving at your retirement destination.
It’s up to you to make your plans for retirement a reality. Here’s a quick two-step process to get you thinking about your retirement goals...and your retirement years’ realities.
Step 1: Make a list of what you want to do during retirement.
Some common goals are:
- Traveling
- Helping your children and grandchildren
- Buying a summer cottage
- Cruising on your boat
- Indulging in your lifelong passion
What are your goals?
Step 2: Now consider that...
- Life expectancies are longer
- Because we’re living longer, long-term care is a greater reality
- Company-funded pension plans are shrinking
- Healthcare costs are increasing
- The future of Social Security is unknown
After thinking about your goals...and then considering the realities of retirement, how prepared do you feel about your retirement future? If the answer is not very, now is the time to do something about it.
Even if retirement is years away, the decisions you make today could significantly affect your future lifestyle. Enough errors in judgment could put your financial security during retirement at risk. That’s why planning your retirement now is so essential, and it’s not as hard as you think, especially if you let a professional help
Retirement savings
Traditional or Roth IRA? A Win-Win Decision
Almost anyone with earned income can open an IRA. The hard part is deciding whether a Traditional IRA or a Roth IRA is the better choice for you.
Traditional IRA = Tax-Deferred Contributions and Earnings
Your contribution to a Traditional IRA may be tax deductible. Earnings on those contributions are tax deferred until you withdraw the money. That means both contributions and earnings can grow tax deferred until you retire. When you do begin making withdrawals (required at age 70 ½, although you can begin as early as age 59 ½), the money will be taxed at your ordinary income-tax rate.
Roth IRA = Tax-Free Earnings
Your contribution to a Roth IRA is not tax deductible, but all earnings are tax free. You can withdraw contributions without penalty at any time. Earnings can be withdrawn without penalty after five tax years following the first Roth contribution as long as you have reached age 59 ½ (other exceptions may apply).
An added perk for the Roth IRA is that you can continue to make contributions even after you reach age 70 ½ if you still have earned income. And, there are no required withdrawals at any age, so a Roth IRA can be a tax-advantaged way to pass assets on to your heirs.
Contributions
The contribution limits on IRAs are adjusted each year. The limit for the 2008 tax year is $5,000; it’s $6,000 if you’re 50 or older. Remember, though, you don’t have to contribute the full amount to an IRA. In fact, through our automatic contribution program, you can fund an IRA with small automatic monthly contributions. So no matter where you’re starting from, you can save and invest for your family’s future financial security.
Let me help
Determining which IRA is right for you depend on your individual situation. I can answer your questions and give you the guidance to help you make that decision. Give me a call to learn more.
The information contained here is general and should not be considered legal or tax advice. Laws of a particular state and your particular situation may significantly affect the general information presented herein. The availability of the tax or other benefits mentioned above may be conditioned on meeting certain requirements. You should consult your attorney or tax advisor regarding your specific legal or tax situation. You should carefully consider investment objectives, risks and charges and expenses and their underlying funds before investing.You should carefully consider investment objectives, risks and charges and expenses and their underlying funds before investing.
