Retirement Planning

For 20 year olds, it is easy to just sock away around 10% of your pay check into a company 401(k) and be done with it. By the time you retire, you will have enough to live comfortably. However, for someone starting to save in their 30s, 40s, even 50s, the calculations can get very messy.

Assure me when I say that those numbers are most never pretty. Nor are they 100% fool proof. They are just estimates. A financial planner will take into consideration things like inflation and interest rates to come up with your individual estimate.

It is important to ask him or her to explain how they arrived at your number. You must make sure the advisor explains the estimates to you in a clear way that you can understand. You must not be afraid to ask him or her to explain even further.

For those of you who have waited perhaps a few years too long to start, you can still (and should) save for retirement. The reality is that you’ll need to take a long hard look at your finances and start deciding what you can or can’t live without. A financial planner can also help point out where you’re overspending.

No young adult wants to be told that they can’t buy this or spend money on that. The fact is that financial planners tell people this every day. The best they can do is give you a structured plan based on your financial and personal goals and expect you to be serious enough about your goals to follow the plan.

The Retirement Planning Vehicles

Another popular way to save for retirement would be to use an IRA. There are two types – a Roth IRA or a Traditional IRA. For 2011, the IRS allows us to contribute up to $5,000 for those of you under age 50. Over age 50 can contribute up to $6,000. Each year the amount that can be contributed changes. Be sure to keep yourself updated.

All of the above mentioned funds are fancy programs designed to help you purchase investments, such as exchange traded funds, stocks and CDs. The main difference between having one of these retirement accounts buy the investments for you and buying them individually on your own are the tax incentives. By reading about each plan, you’ll find out what those tax incentives are.

When it comes time to take out money from your retirement plans, there are rules that you need to follow. Again, be sure you familiarize yourself with all the parts of any retirement plan that you currently have. Educate yourself on those other plans that you may qualify for.

Even though it will be years before you start withdrawing money from your plan, it is important to know NOW the rules for taking money out of them. Some plans allow you to take money out before you reach retirement age for other reasons. If you don't research ahead of time and learn that, you could miss out on the opportunity to use your retirement money in other eligible ways.

Retirement planning is all about figuring out your options and deciding which of those options is going to work best for you.

Read. Learn. Become informed. Make decisions. Create a plan. Follow it. Live!

And Be Financially Free!

Were your questions answered? If not, let me know.


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