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- Retirement Age - The earlier you retire, the more money you will need to last throughout retirement. It’s important to prepare for unanticipated occurrences that could force you into an early retirement.
- Life Expectancy - Although you can’t know what the duration of your life will be, there are a few factors that may give you a hint for example family history and your own past and present health issues.
- Future Health-Care Needs - Health-care costs have been rising much faster than general inflation, and fewer employers are offering health benefits to retirees. Long-term care is another consideration. These costs could severely dip into your savings and even result in your filing for bankruptcy if the need for care is prolonged. Factoring in higher costs for health care during retirement is must! You may need to consider purchasing long-term-care insurance to help protect your assets.
- Lifestyle - Another important consideration is your desired retirement lifestyle. Do you want to travel? Are there any hobbies you would like to pursue?
- Inflation - Extremely important factor- Inflation has the potential to lower the value of your savings from year to year, significantly reducing your purchasing power over time. It is important for your savings to keep pace with or exceed inflation.
- Social Security - Many retirees believe that they can rely on their future Social Security benefits. However, this may not be true for you. The Social Security system is under increasing strain as more baby boomers are retiring and fewer workers are available to pay their benefits. And the reality is that Social Security currently provides only 37% of the total income of Americans aged 65 and older with at least $55,889 in annual household income.1 That leaves 63% to be covered in other ways.
- TRADITIONAL IRA - You can contribute up to $2,000 per year into an IRA. The amount of this contribution that is deductible on your income tax return depends on your Adjusted Gross Income (AGI) and whether you are covered under an employer sponsored qualified retirement plan. Thus, depending on your filing status (Single, Joint, etc), and your AGI, your contributions may range from fully deductible to totally non-deductible. So even though you are eligible to contribute to your IRA, you may be in a position where none of these contributions are in fact deductible.
- EDUCATION IRA - You can put away up to $500 per year into an education IRA, the money grows tax-free and has preferential tax treatment upon distribution to the beneficiary who uses it for authorized education expenses. These plans are not very common in that they are very restrictive on who can make contributions to them, the amount of total contributions allowable each year, and the limitations on what exact education expenses qualify. Your financial planner should be able to assist you in evaluating what savings plan you should undertake to prepare for higher education costs, as well as in reviewing many of the tax-sheltered savings plans now sponsored by the various states, even for benefits of non-state residents.
- SEP IRA - Simplified Employee Pension - This is an employer established and funded Simplified IRA, where the employer can put up to 15% of your compensation into a special IRA account. Sole proprietors may establish these plans for their own benefit. They are sometimes used instead of Keogh retirement plans because they have fewer administrative and tax filing requirements.
- SIMPLE IRA - This is a rather new creation, but rapidly becoming more popular. It’s another employer sponsored and administered retirement plan. The attractive features of this plan includes not only the ability for the employer to establish and fund a retirement plan for the benefit of him/herself and his/her employees, but it also permits employees to contribute up to 100 %, but no more than $6,500 per year, into an IRA. Separate rules relative to required employer contributions and premature distributions apply.
- ROTH IRA - Contributions are NOT deductible when the funds are contributed, but the Roth IRA earnings accumulate tax-free and remain tax-free upon distribution. To be eligible to contribute, your Adjusted Gross Income must be under $95,000 for singles and $150,000 for married couples, as of December 2000. You cannot withdraw your funds within the first 5 years after the establishment of the Roth without a penalty. Given that this 5-year testing period can successfully be addressed by proper tax planning, the establishment and at least partial funding of a Roth IRA account should be on the discussion list of the financial advisor of every taxpayer who qualifies to open such a plan
Knowing exactly how much to save is a serious matter and could affect you in your later years. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific situation.
One rule is that retirees will need approximately 80% of their pre-retirement salaries to maintain their lifestyles in retirement. However, depending on your own situation and the
type of retirement you hope to have, that number may be higher or lower.
In addition to having life insurance it's important you have enough funds allocated for retirement. Many people realize the importance of saving for retirement, but are not prepared for retirement making ending with more struggles than a relaxation. Depending solely on social security or retirement account may not provide you with the lifestyle you deserve in your later years.
To assist with preparing for your future the we offer Individual Retirement Accounts (IRA's) to help you meet your goals. An IRA is a personal savings plan that provides income tax advantages to individuals saving money for retirement purposes.
Please contact us at (773) 873-8977 to schedule an appointment.
There are five different types of IRA’s:
Here are several factors that can help you work toward a retirement savings goal.
email: LDavis@LDavisagency.com
www.LDavisAgency.com
email: LDavis@LDavisAgency.com
