Senior Center

Ideas for Retirement Planning

By Daniel @ LivingSenior - February 29, 2012

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Will you be ready for retirement? This is the question that many people ask themselves, but most rarely have an easy answer to the question. In this day and age, “retirement” is such a shaky concept, it’s no wonder that many people are working well into their 70s out of either debt, fear of the unknown, or both. When it’s time to throw around ideas for retirement planning, there are a few things to keep in mind. First and foremost, why are you planning your retirement? What are your goals and what path should you take to effectively meet them? These can be difficult questions to answer – but fortunately with the help of your employer and financial advisors, there are easy answers!

To get started, accept the harsh reality that social security will not be enough. This may have been a simple fallback plan for previous generations, but even then the program was never effectively designed to be a sole means of income. Instead, put off the procrastination rather than the planning, and strategize other sources of income before you hit retirement age. The average life expectancy in the United States is around 78 years old, meaning if you retire between 55-65, you are going to need an extra boost of income.

IRAs are one way to save some extra money. Short for Individual Retirement Accounts, these are savings accounts that you must start on your own to set aside income for retirement. A traditional IRA involves tax deferments, which means there will be a penalty if you withdraw before age 59 ½. This can be a great form of discipline for many, as well as a frustration for others. A Roth IRA may work better for you, as there are no penalties and interest is earned differently. Check with a financial advisor to decide which works better for you.

A defined contribution plan, otherwise known as a DC, is another way to save for retirement. This is sponsored by your employer and allows you to have an equal amount of funds to be paid out for a set number of months after you retire. You will find these plans with “old time” businesses – those that were thriving in the 50s and 60s, and still exist today but have ceased to update their plan options. The defined contribution plan (DC), is the more popular option for employers today. With this, you make a set contribution each month and the money is invested. Sometimes the employer matches your contribution.

Finally, a 401(k), the most popular out of all the employer-sponsored plans, involve contributions made by both employees from pre-taxed income. Employers then make a matching contribution in most instances. Both the interest and the money contributed is tax-deferred until your first withdrawl. If none of these options sound realistic to you, then chat with your company about a profit sharing plan. While not all businesses have this for their employees, many do, so it never hurts to talk to your HR department. These and other ideas are available to the average American worker, and are definitely worth checking out, so you are not left in a lurch right after that retirement party!