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Personal Retirement

Retirement Planning 101

The day that everyone dreams of, the day they no longer have to work. When they can kick back and retire, without having to worry about bosses and the time clock. Perhaps they can travel the world, like they always wanted to. They could rent a camper and drive across the country, stopping to see the grandkids along the way. The day we retire, is it just a dream? Have you done any planning for your retirement?

It is never too early
You should start saving for retirement as early as possible. Most jobs offer 401K plans or other benefits. You should always keep in mind, there is a day when you will no longer be working, and the money you invest now, may grow to pay for those dreams you have for tomorrow. Waiting until the last few years before retirement, you are placing most of your faith that Social Security will be able to provide your income for you. In truth, Social Security is in trouble, and you may not get what you are expecting. The earlier you start saving, the more likely it is that you can achieve your retirement goals.

Keep the dream alive, but within reason
When you are estimating how much you will need to have a year to retire on, do not use standard measurements. These normally ideal situations and mathematical formulas rarely suit your individual needs. Start your planning by setting realistic goals of what you want to do in retirement. Sit down with a retirement advisor, and come up with the estimated costs of your retirement per year. This will guide you in the direction of how much you will need to save, to reach those goals.

401K
This is the wisest and most popular retirement investment tool. There are many benefits to using a 401K. Most of these are done through work and the employer may even match a portion of your contribution. This is like getting a boost to your savings early on. Another advantage of the 401K is that it is usually offered with investment funds rather than specific picks. This spreads out your liability and maximizes your growth potential. There are different investment strategies available to you as well. These strategies mix your investments to be more aggressive, or more conservative, depending on your risk tolerance. Since 401K contributions are before taxes, you get a break on your taxable income as well. Once you retire, you do pay taxes, based on what you withdraw from your fund.

IRA plans offer great tax savings
IRAs or Individual Retirement Accounts offer flexibility with great tax benefits. There are two fundamental types of IRAs. There are Traditional IRAs and ROTH IRAs. Traditional IRAs are tax deferred. This means that you are not taxed on the contribution amounts, similar to the 401K, but you are taxed once you withdraw on the fund. There is a maximum yearly contribution to the traditional IRA of $4,000, higher if you are older. ROTH IRAs are taxed during contributions, but not when you retire and draw against it. You should consult a financial advisor to find out more about which IRA is right for you.

You should work with a retirement advisor to find the right combination of retirement savings plans. You may find that you will still work part time to supplement your retirement funds and Social Security. This is not bad at all, there are definite health and psychological benefits to keeping somewhat active in the workforce. You should consider your retirement a goal, do not loose focus of it. Make sure that you have reasonable expectations and take the steps to achieve them, today.