Enjoying Your Retirement – Part2
Reviewing your current savings and investments and your retirement goals is your first step. Then, planning a budget for your retirement is vital to ensure that you have the confidence and security you need in retirement. Start now! First, Review what you spend. Then, review your retirement income. Lastly, review your savings and investments.
Lower your taxes. Do not overlook the options available to save money on taxes or tax deferred. By opening an Individual Retirement Account (IRA), you can minimize your taxes while you are working, letting your retirement savings grow faster. A Traditional IRA is often best for someone who expects to be in a lower tax bracket during retirement. You will not pay tax on your contributions or earnings in the account until the funds are withdrawn. A Roth IRA may be best if you expect to be in the same or higher tax bracket when you retire. Your after tax savings in this type of plan can be invested and grow tax free. Distributions you take during your retirement will be tax-free.
The rules concerning eligibility and distributions from IRA accounts are complex. If you require the funds early, a withdrawal from a Traditional IRA before you reach age 59½ could trigger a federal 10% penalty. Also, distributions from this type of account must begin when the investor reaches age 70½. In contrast, a Roth IRA does not require a minimum distribution during the investor’s lifetime, and it provides more flexible access to the funds if they are needed earlier.
Both types of IRAs allow you to make regular contributions to your retirement savings and allow you to invest your money so your retirement savings will grow.
However, some people may find an annuity provides a better way to save and plan for retirement. An annuity can provide a dependable income for you throughout your retirement years. I’ll write more about this retirement savings alternative next time.
For most people, a combination of these retirement options will ensure that they have the savings and income to enjoy a secure and happy retirement.