Retirement Planning Tips

Try to Get a Good Sense of What Your Desired Lifestyle Will Cost

In large measure, this will be a function not only of what you want to do, but also where you live - both the part of the country (or the world) in which you choose to settle and the nature of the four walls you’ll be calling home. Recognize too that you won’t necessarily live in the same place throughout retirement. Moreover, continue to budget for things that are elements of your life currently such as the following:

• Clothing
• Emergencies
• Food
• Our seemingly constant companion, inflation
• Transportation
• Personal and health care expenses (Medicare won’t cover all of them!)

Save as Much as You Reasonably Can & Invest Appropriately

True, particularly if you have in mind a modest lifestyle in retirement, it’s possible to “over-save.” Yet people often underestimate - sometimes significantly - what their desired lifestyle will cost. Others may be quite realistic about what they will need but have difficulty putting enough aside over the years or fail to manage responsibly whatever wealth they have been able to amass. Whatever your situation, building your nest egg should be a high priority.

To the Extent Possible, Maximize the Financial Resources You Can Draw upon in Retirement

A number of options exist, among them:

Defined-Benefit Pensions

These are traditional pensions and even though fewer and fewer workers have this perk, it is quite a valuable one, as your employer covers the full cost and what you receive will usually be very reliable. Payments are fully taxable as ordinary income.

Defined-Contribution Plans

These are sponsored by employers and generally take the form of so-called qualified retirement plans, such as 401(k) and 403(b) plans, or some types of IRAs, such as SEP and SIMPLE IRAs. These plans feature limits on how much can go in each year and are typically funded with some combination of contributions made by your employer and pre-tax portions of your salary or wages. Account balances grow tax-free, but distributions are fully taxable as ordinary income.

Traditional IRAs

Depending on your level of income, traditional IRAs can be funded with your own pre-tax money or, less commonly, after-tax money. Traditional IRAs can also receive money “rolled over” on a tax-free basis from employer sponsored plans, such as 401(k) plans. Account balances grow tax-free. When distributions from a traditional IRA are taken, they will be taxable as ordinary income in proportion to the amount of pre-tax money you contributed or rolled over.

Roth IRAs

These, too, are funded with your own money, specifically after-tax dollars. This means that both earnings and distributions come out tax-free. Also, whatever remains in the account grows tax-free. Note: Some employers offer Roth 401(k) plans, although these are relatively rare.

Tax-Deferred Annuities

As the name suggests, after-tax money of your own that you invest in these products grows tax-free. Any increase in value beyond the amount you invested is taxable as ordinary income when distributed.

Individually Owned Savings & Investment Accounts, Certificates of Deposit, Etc.

These are funded with after-tax dollars, plus whatever you earn is taxable. Some of these investments produce capital gains, which are generally taxed more favorably than interest and other sorts of ordinary income.

Employment

For some people, “retirement” means continuing to work a bit longer, albeit on a part-time basis. Similarly, working full time for an extra year or two can make additional assets available for use in connection with one or more of the options above.

Social Security Benefits

Despite concerns about the long-run health of the social security system and the size of benefits one can count on, this extremely common form of retirement cash flow definitely needs to be taken into account.

Non-Financial Assets

Things that save you money can be just as valuable as a stream of payments. Examples would include good health, smart purchasing, and having loved ones nearby and available to help when needed.

Regardless of the combination of options you assemble and draw upon, be sure to seek competent professional guidance, as the tax rules can be complex and subject to change and the investment challenges considerable. For instance, decisions about things such as when to begin drawing social security payments or whether to roll retirement plan assets into an IRA will require careful planning.

Don’t Overlook Ways to Support Treasure Coast Hospice That Result in Retirement Cash Flow

Especially if you are precluded from making additional contributions to your IRA or qualified retirement plan, a charitable life income plan can be an attractive supplement to existing arrangements. Here are some of your choices:   

• A charitable gift annuity makes favorably-taxed payments to you (or to you and your spouse) for life, plus you receive an immediate income tax charitable deduction, providing tax savings if you itemize. If you’re still working, you can defer the start of the payments, whereas if you are retired, you’ll likely want the payments to begin immediately.
• A charitable remainder trust is similar to a gift annuity in some respects, since both can provide income for life, but offers greater flexibility. This can be very appealing if you don’t need additional income now but would like to secure a source of payments in retirement, and also provides an immediate income tax charitable deduction.
• You can deed a personal residence – including a vacation home – to Treasure Coast Hospice subject to a retained life estate. This arrangement enables you (or you and your spouse) to continue living in your home or using your property as long as you wish. The older you are, the larger the immediate income tax charitable deduction you receive.
• If you are age 70 and a half or older, you can make an IRA charitable rollover to Treasure Coast Hospice directly from your traditional or Roth IRA. Such a distribution will satisfy your annual minimum required distribution and permit a tax-free gift of up to $100,000 to Treasure Coast Hospice. Separately, drawing on assets in an IRA or a qualified retirement plan to make current gifts to Treasure Coast Hospice can sometimes make sense for anyone over age 59 and a half, although careful planning is required.

Beneficiaries

Finally, because retirement planning vehicles such as defined-contribution plans, tax-deferred annuities, and many IRAs contain income that has never been taxed, you’ll want to devote attention to your beneficiary designations. Previously untaxed amounts left to family members and other individuals will be taxed when received by them but are not subject to tax when received by Treasure Coast Hospice. Likewise, tax savings can be combined with providing for heirs when certain retirement plan assets are used for a gift annuity or a charitable remainder trust at the end of your life.