A person who turns 65 today could be expected to live as many as 20 years in retirement as compared to a retiree in 1950 who lived, on average, an additional 15 years. Longer life spans have created a number of new issues that need to be considered when planning for retirement.
Seven questions we can help you answer to plan your retirement:
- Do I have enough funds to see me through the rest of my life?
- How am I going to fund my retirement?
- How, and when, will my social security benefit come into play?
- Will my healthcare needs be met?
- Is my estate in order?
- How will my work benefits help me make ends meet in the future?
- Individual Retirement Account or Roth IRA? What’s the best solution for me?
Do I have enough funds to see me through the rest of my life?
The prospect of leading a longer, full life after retirement means you’re going to need to provide for a steady stream of income that cannot be outlived. Maintaining your cost-of-living needs to be one of your primary concerns when it comes to your retirement planning.
How am I going to fund my retirement?
Prepared retirees usually rely upon three main sources of income: Social Security, individual or employer-sponsored qualified retirement plans, and their own savings or investments. A sound retirement plan will emphasize qualified plans and personal savings as the primary sources, with Social Security as a safety net for steady income.
How, and when, will my social security benefit come into play?
If you were born after 1960, your retirement age when you’re likely to quality for this benefit is likely to be increased up to the age of 67. It’s important to consider the amount paid in benefits is based upon your earnings while you were working. If you would like to continue to work and delay receiving benefits, you could do so, and build up a larger benefit. Conversely, early retirement benefits are available, at a reduced level, as early as age 62.
Will my healthcare needs be met?
A longer lifespan is likely to mean more medical expenses due to the process of aging. While the federal government provides a safety net in the form of Medicare, it may not provide enough cover especially when it comes to chronic conditions. That’s why planning for your long-term care in the event of a serious disability or chronic illness, is becoming a key element of retirement planning.
Is my estate safeguarded against my passing?
Planning for the transfer of assets at death is a critical element of your retirement planning especially if you have dependents. Planning for estate transfer can be as simple as drafting a will, which is essential to ensure that assets are transferred according your wishes. Larger estates may be confronted with settlement costs and sizable death taxes, which could force liquidation if the proper planning is not done.
How will my work benefits help me make ends meet in the future?
If you have an Employer Sponsored Plan, the funds you receive at retirement is based on your total contributions while you were working, the returns earned, and your retirement time horizon. As with all qualified plans, withdrawals made prior to age 59 ½ may be subject to a penalty of 10% on top of ordinary taxes that are due. Depending on the size and type of the organization you work for, they may offer a 401(k) Plan, a Simplified Employee Pension Plan or, in the case of a non-profit organization, a 403(b) plan. We can help you understand how this forms part of your overall retirement plan.
What’s the difference between an Individual Retirement Account or Roth IRA? And what’s the best solution for me?
An Individual Retirement Account (IRA) is a tax qualified retirement plan that’s been established as a way to save for retirement with the benefit of tax favored treatment.
A Roth IRA is different in that the contributions are not tax deductible; however, the earnings growth is not currently taxable. To qualify for tax-free and penalty-free withdrawals of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Distributions from traditional IRAs and employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching 59 ½, may be subject to an additional 10% federal tax penalty.
Whether it’s an Individual Retirement Account (IRA) or a ROTH IRA, Antonio D. Sankey and Associates can provide you with the best solution when it comes to selecting a retirement account for your individual needs.
For more information about IRAs and Roth IRAs, and other solutions to make provision for your retirement income needs, please contact us today.