Retirement Savings Tips

Retirement is a time of life that many people look forward to. For others, retirement is a worrisome time because they'll lose their regular income and will have only Social Security benefits to help make ends meet. Many retirees discover too late that they didn't plan well enough for retirement and their Social Security benefits aren't enough to cover their expenses. So often seniors who have retired from a job they worked for years will find new part-time jobs after retirement to help pay their bills.

Social Security

Social Security is a mandatory plan of withdrawing taxes from your income while you work and paying you benefits once you retire. The current rate is 6.2% and an additional 1.45% for Medicare. Your employer matches that tax, but many seniors find that their Social Security benefits aren't enough to fund their retirement.

Retirement Planning

Planning for your retirement with a variety of investment strategies can help make your retirement years more enjoyable and less stressful. Social Security benefits are a given when you retire, but you can also make plans on your own through annuities, IRAs and a 401k to help fund your retirement.

IRAs

Traditional IRAs have many restrictions and require that once you withdraw the money after age 59 1/2 that you pay income tax on the funds then. Roth IRAs allow you to invest the money before income tax and withdraw the money after that age tax-free. All IRAs impose penalties and fees on money withdrawn early. You can open an IRA at almost any bank or financial institution.

Annuities

Annuities let you pay a monthly amount into a fund for a number of years with the promise that at a certain point you stop paying and the annuity makes payments to you for the rest of your life. Annuities are typically expensive, but some low-cost annuities are available today, often in the form of a whole life insurance policy. If you die before you start receiving payments, or before you recoup your investment, the brokerage or company that offered the annuity benefits keeps the money. Obviously, the longer you live once you start collecting, the bigger the return on your investment.

Inheritance

It's a good idea to plan your inheritance early. That way if the unthinkable should happen, you have control over where your assets are distributed, but once you reach retirement age, you should revisit your inheritance plans to adjust for your current assets and situation. If you haven't made a will & trust by the time you're retirement age it's important to do so to ensure that your heirs and beneficiaries get what you want them to have.

401k

Many employers offer employees a 401k plan. With this plan, you defer a certain percentage of your income to go into the 401k each month or each pay. You're not taxed on that income yet, and with a Roth 401k, as long as you withdraw the money properly after age 59 1/2, that money will remain tax free.