Financial generalizations are as old as time. Some have been around for decades, while others have only recently joined their ranks. Let’s examine a few common retirement assumptions.
Retirement means I can stop investing. In the past, retirement was viewed as an “end” in many ways. These days though, retirement is often seen as an opportunity to return to one’s passions or just another of life’s many chapters. That doesn’t mean you should stop investing, however.
That depends on your situation. Some may earn less in retirement, which could lower their tax bracket which may reduce overall taxes. On the other hand, some retirees may end up losing the tax breaks they enjoyed while working. For more insight into your tax situation in retirement, speak with a tax or financial professional. They can help you manage withdrawals from your qualified retirement accounts.
No matter how far behind you feel you are, don’t lose hope. Remember, you can make larger, catch-up contributions to your Individual Retirement Accounts (IRAs) after age 50. In fact, if you are 50 or older this year, you can put as much as $25,000 into a 401(k) plan.
Withdrawals from traditional IRAs and distributions from 401(k) plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.
Unfortunately, Medicare doesn’t cover extended care, if that’s the only care you need. Instead, extended care insurance is often the best choice when preparing for retirement.
Maybe. This one depends on how you approach retirement. In the later phase of retirement, people often choose to live on less. But for many, the first few years of retirement mean traveling and new adventures. In other words, taking a realistic look at where you would like to be in retirement makes all the difference when it comes to retirement costs.
At the end of the day don’t fall victim to the many retirement assumptions. There is no “one-size-fits-all” retirement strategy. Every individual, couple, or family needs a strategy tailored to their situation, risk tolerance, and financial objectives. With proper preparation and the help of a trusted financial planner, there’s no reason you can’t create a strategy tailored to whatever life has in store.
Information vs. instinct. When it comes to investment choices, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we may not even be aware … Continue reading “Making Investment Choices”
In corporate America, pension plans are fading away. Only 16% of Fortune 500 companies offered them to full-time employees in 2018, according to Willis Towers Watson research. In contrast, legal, medical, accounting, and engineering firms are keeping the spirit of the traditional pension plan alive by adopting cash balance plans.1
I’d like for you to meet my friend, Hugh. He’s a retired film stuntman who, after a long career, is enjoying his retirement. Some of what he’s enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure … Continue reading “The Gift Tax”
“Never confuse a single defeat with a final defeat.” — F. Scott Fitzgerald The economic struggles in our country are among the worst we’ve ever seen. In April, a record 20 million people lost their jobs, and 36 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March. Record drops in consumer … Continue reading “Better Times Are Coming”
You can sum up the appeal of a Roth IRA in three words: federal tax benefit. Potential earnings in a backdoor Roth IRA grow tax free as long as the owner abides by the Internal Revenue Service (I.R.S.) rules, and withdrawals are federally tax free once you reach age 59½ and have held the Roth … Continue reading “Backdoor Roth IRA”
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