Retirement is an exciting time for exploring new avenues — or finally taking it easy and enjoying the life you’ve built. By appropriately planning for retirement, you can ensure that you’ll have adequate resources to pursue your goals after your working years end.
Leaving the working world for good isn’t always as predictable as it used to be, with a guaranteed pension waiting on the other side. For many Americans, planning for retirement presents perplexing challenges, since many workers now will need to rely on work-related and personal savings accounts along with benefits from Social Security. And with Americans increasing their lifespans, savings also must last longer.
Whether you’re a decade or more from retirement or it’s right around the corner, you can take steps to make your golden years as comfortable and secure as possible. Our retirement planning services include advising clients regarding issues related to both individual and business retirement.
Individual Retirement Planning
If you’re not already saving for retirement, the time to start is now. For workers who are many years from retirement, you can save less and benefit from compound interest over time. For older workers, it’s important to start saving as much as possible for later retirement income.
Estimating your likely future needs and creating a budget also is important. Financial experts project that you will need approximately 70 percent of what you earned prior to retirement — and lower earners may need up to 90 percent — to preserve your current quality of life.
If your current company offers a retirement savings plan like a 401(k), you will benefit significantly from joining and contributing as much as you can, especially if your company matches a portion of your contributions.
Sending part of your paycheck to an employer-sponsored retirement savings plan also will help reduce your tax burden. We can assist you with understanding plan details such as how long you’ll need to stay with your employer to receive all the money you’ve contributed.
Employer-sponsored 401(k) plans typically are very beneficial, and your account balance may grow quickly, especially when you use automatic savings and take tax deferral into account. Certain employees may have access to a 403(b) or 457 plan rather than a 401(k); these plans function in a very similar manner.
Does your employer offer a traditional pension plan? If so, you should find out if you’re covered and request an individual benefit statement to determine the value of your benefit. If you’re considering moving to a new job, you’ll want to find out how the change will affect your pension benefits.
If you don’t have access to an employer-sponsored plan, consider opening an Individual Retirement Account. For 2016, the limit for contributions to an IRA is $5,500 for an individual or $6,500 if you’re 50 or older; the limit does not apply to rollover contributions.
IRAs also provide advantages at tax time, and you can choose between a traditional or Roth plan; your choice affects the tax treatment for your withdrawals and contributions.
It’s also important to understand how much Social Security will help you in retirement. Social Security typically pays benefits of about 40 percent of what you earn before you retire. You can estimate your benefit by using the Social Security Administration’s Retirement Estimator tool.
Business Retirement Planning
If you’re self-employed — or if you’re a small-business owner wishing to begin a retirement savings plan for your workers — your retirement planning options differ from those for traditionally employed individuals. For small businesses and for employees who want to ward off higher tax rates later in life, the Roth 401(k) provides participants with the opportunity to tax contributions up front but with tax-free withdrawals — including earnings — in retirement.
Another option is a Simplified Employee Pension plan, known as a SEP IRA. These plans are easy to get going and are fully funded by an employer, with no employee contributions allowed.
The Savings Incentive Match Plan for Employees, or SIMPLE IRA, is another affordable option. Both employees and employers can contribute, but the employer is required to match, and the match is vested for the employee immediately.
If you’re a self-employed individual or an employer and have a plan in place, it’s important to stay apprised of changes to plan regulations and applicable laws.
Work with Experienced Retirement Planning Attorneys
Whether you’re a worker in a traditional job or a self-employed individual, proper planning is vital for ensuring a comfortable retirement. To work with an experienced individual and business retirement planning attorney, please contact the offices of Gold & Associates, P.C.