I keep hearing people use that word and I don’t think it means what they think it means. When it comes to the word “retirement” I feel a little like Inigo must have felt. I do not think it means what you think it means.” Contributions can be pre-tax or after-tax, earnings are tax-deferred, and Roth IRAs offer the opportunity for tax-free distributions in retirement.Do you remember the scene from The Princess Bride where Vizzini keeps using the word “inconceivable” at all the wrong times? Inigo Montoya finally corrects him: “You keep using that word. Individual retirement accounts (IRAs) offer several options depending on your income. Your employer may even match your contributions, up to a certain amount. Workplace savings plans such as 401(k)s and 403(b)s allow you to put your money to work before it’s taxed, and earnings in these accounts grow on a tax-deferred basis. 1 Put retirement savings into tax-advantaged savings accounts To meet your retirement savings goals, set aside as much as you can as soon as you can, ideally at least 10-12% of your gross income. The earlier you invest, the sooner you’ll start earning income through interest. 2 Invest early to take advantage of compounding interest in retirement Average Social Security benefits are $1,657 per month, so you’ll want to be responsible with your financial well-being and diversify your streams of income. Social Security can provide a regular stream of income in retirement, but if you’re like most people, it can’t fulfill all your financial needs. How did you do? If you didn’t answer correctly as often as you would like, the tips below can help as you think about recalibrating your retirement planning.ĭon’t plan to rely on Social Security benefits alone in retirement Begin to adjust your portfolio to protect it from the impact of market downturns Starting to invest as early as possible to benefit from compound interestħ. Stop setting aside money in your workplace savings plans and IRAsģ. Begin to draw down your retirement savingsĭ. Move all your investments into stocks and other risky assetsĬ. Begin to adjust your portfolio to protect it from the impact of market downturnsī. Which of these retirement savings strategies should you pursue in your final years of employment?Ī. If you’re younger than 59½ and need cash to meet an immediate need, which of these retirement savings sources should you avoid tapping?ħ. Medical equipment like wheelchairs and walkersĦ. What healthcare cost does Medicare NOT cover in retirement?Ĭ. A workplace savings plan (such as a 401(k) or 403(b) plan)ĥ. Which of these types of financial accounts should you consider using to save for retirement?Ī. Delaying saving to focus on other financial priorities, like paying down debtĤ. Starting to invest as early as possible to benefit from compound interestĭ. Saving money in accounts where all earnings are subject to current taxĬ. Waiting for a bonus or inheritance to help fund retirementī. Which of these steps is likely to have the most favorable impact on trying to meet your retirement goals?Ī. As a rule of thumb, at least what percentage of your gross (pre-tax) income should you try to set aside for retirement savings on a regular basis?ģ. According to the Social Security Administration, what percentage of your income is Social Security designed to replace in retirement?Ģ. Test your knowledge to see if your retirement savings plan is setting you up for future financial security.ġ. The more you check your retirement expectations and understand the strategies and options available to you when planning your retirement, the better prepared you’ll be. Retirement is possibly the most important long-term financial goal of your lifetime. How confident are you in your retirement plans? Take this retirement expectations quiz to see if you can spot potential setbacks to your retirement savings plan that could interfere with your future financial security. Find a financial advisor or wealth specialist.
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