Retirement

Retirement is one of the things that we all look forward to as we work towards it. Planning for retirement is an important step to ensuring we can enjoy our golden years without worry. An investment advisor can help provide individuals with the information they need to create a comprehensive retirement plan that will ensure financial stability and security upon retiring. There are several ways to save for retirement. From 401k plans to IRA accounts, you can start building your savings today.

Retirement Savings Plans

One of the easiest ways to save for retirement is through an employer sponsored 401k retirement plans. Employees can contribute pre-tax monies from their salaries into the account for retirement savings and invest it in a variety of ways. 401k plans have been around for a number of years. These savings and investment programs are an ideal way for employees to build their nest egg in a tax deferred way. Tax deferred means that the contributions and earnings of the account are not taxed until such time as they are withdrawn, ideally by a retiree.

Most 401k retirement plans allow the employee to invest in a variety of stocks, bonds, and mutual funds to increase their earnings. These can be divided up according to risk to better allow a more diverse portfolio. Some employers will contribute funds to an employee's 401k account in a matching scenario. For example, if an employer is offering to match the employee's contribution at 100% up to 6% of their earnings, it means that if the employee contributes 6% of their gross pay into the account, the employer will match the entire amount. It is wise to try to contribute at least as much as the employer will match to receive the full amount of the employer's contributions.

Another excellent way to save for retirement is by using a Traditional or Roth IRA account. In a Traditional IRA, an individual can invest their contributions in the funds allowed by the manager. These can include certificates of deposits, stocks, bonds, or mutual funds. If the investor does not have a 401k, their contributions to a Traditional IRA may be tax deductible, and the earnings are tax-deferred. When the investor reaches the age of 70 ½, there are required distributions that must be withdrawn in order to avoid severe penalties.

Individuals may want to consider a Roth IRA over the Traditional IRA. In this retirement program, individuals contribute after-tax monies into an investment plan. The contributions and the earnings can be withdrawn tax-free once they are eligible. Eligibility requirements for tax-free earnings withdrawals are that the plan has reached its appropriate age, and the age of the recipient is at least 59 ½. The contributions to the plan can be withdrawn tax-free once the age of the plan has been met. The disadvantage of the Roth IRA is that the contributions are not tax deductible as in a Traditional IRA.

Calculating Savings

To determine how much is needed for retirement, individuals must first determine the approximate year they plan to retire and the expected expenditures afterwards. Make a list of your current expenditures and then eliminate the items that will no longer have to be paid when you retire, this will provide a fair estimate of how much is needed. For instance, if your house payment today is $1400 a month, but it will be paid off before you retire, do not account for it in your retirement savings. Your health care costs are likely to increase, so you may need to consider adding those expenses into your calculator.

If you have goals after you retire, such as taking a tour of Europe, or building a dream home, those goals will need to be taken into consideration as well. There are a variety of retirement calculators available online to help individuals determine what their retirement savings should be. You may also want to meet with an investment advisor to gain assistance in making your determinations.

Employer Pension Plans

If you are lucky enough to have an employer pension plan, you are ahead of many people in your savings plans. There are two basic types of employer paid plans, pension, and cash-balance. In a pension plan you can usually choose between a lump sum payout and a monthly annuity payment. In a cash-balance plan the funds are invested much like a 401k except the employer puts in all the contributions.

Retirement does not have to be a scary proposition if you plan well and plan early. Take advantage of any plans that are offered by your employer, and be sure to only use the monies for other things such as a college education or buying a home as a last resort. By following these suggestions, you will be sure to have a comprehensive plan that will provide you with financial security in your later years.

Find a Financial Advisor

Find an Advisor

Financial Advice

We can help you find a financial advisor

Our specialists will conduct a custom search to find local planners and advisors who meet your specific requirements.

"I wanted to be sure I met with an advisor who wouldn't just throw all sorts of financial jargon at me without explanation, and this site helped me find an advisor who was great at explaining things simply. Thanks!"

Sharon D, Tempe AZ