Retirement – Will You Be Ready?

What Should You Do?

Yesterday would have been the best time to start planning for your retirement – retirement age is coming faster than you can imagine. The younger you are when you start saving and investing for your retirement, the more you can build up your future assets using fewer dollars because you are taking advantage of passing time and compounding interest.

Planning is the most important factor in building a sound retirement fund, with the ultimate objective being to take advantage of your lower income after retirement you’re able to draw on any tax-free or deferred-but-taxable savings when you are in a lower tax bracket.

Planning includes ensuring that you will not have to dip into your retirement funds for unforeseen expenses. You need to plan for what might possibly happen between now and retirement age, and ensure that your retirement income won’t suffer and that you don’t have to pay a penalty to use your nest egg funds.

For example, you might suffer a long-term illness. You should consider buying long term health insurance (if your employer does not provide it). It is much less expensive when you are younger. There can also be tax benefits with long-term health insurance; check with a qualified financial planner.

If you are the breadwinner for your family, you need disability insurance (again, if your employer doesn’t provide it). This will ensure that your family will still have an income even if you can never work again.

Consider life Insurance with cash values and “waiver of premium” coverage in the event that you become permanently disabled. Cash values can be used as annuity income when you retire. There are also tax advantages when you retire, or if you die prematurely.

Look into annuities. They come in many different options. You can buy annuities with a single payment or in installments. Payout options upon your retirement vary, such as life annuity with no refund, refund life annuity, life annuity with installments certain, joint life and survivorship, and joint life. Your financial advisor can explain the advantages and disadvantages of each payout option. Some annuities allow you to withdraw a portion of your payments per year without penalty (although any withdrawal from an annuity may be subject to taxes and a 10% federal penalty if taken prior to 59-1/2 years of age).

Annuities can be purchased in various investment types such as fixed deferred annuities and variable annuities.

All investments should be made with the advice of a expert in financial planning and a tax advisor with knowledge of plans that defer taxes or are taxdeductible.

Just remember that the steps you take now will determine how well (or how poorly) you will live in the later years of your life.