What’s the No. 1 goal for investors? Retirement, according to most polls. You may want to look at IRA’s (Individual Retirement Accounts) as an alternative to spending all your money, and even if you have a retirement savings plan at work! Let me explain.
If you don’t contribute to some retirement plan whether an IRA or another plan, how do you plan on paying for your time off down the road? Social Security? Your company’s traditional pension plan? (If they even have one any more. Many companies and organizations dumped those plans. Do you still have one?) See, for nearly everyone, those retirement income sources probably won’t give you near enough retirement income. Social Security pension plans were really not intended to be your only sources of cash in retirement. Plus, as we’ve discussed before, Social Security has mind-boggling funding problems, depending on your age and whom you work for. So…if you want a realistic chance to enjoy retirement…you’ll need to add in a bunch of personal savings! But where do you put these funds?
Well, if you’re in an employer-sponsored plan (e.g., 401(k), 403(b), 457) instead of an IRA, this type of plan might be the right choice if your company or organization matches your contributions to the plan. However, if that’s not the case, you might be better off in a Roth IRA (if you’re eligible), at least for a portion of your savings. (We can help you figure this out!) Generally, a Roth IRA is more flexible and might provide more after-tax retirement income than a company sponsored plan.
See, your adjusted growth income (AGI), determines whether you’re eligible for a deductible traditional IRA (which means lower taxes now and until you retire) or a Roth IRA (which means no deduction, but you never pay taxes on the investments in the account).
Finally, IRAs can be treated differently than other accounts. For example, assets parents hold in a regular account can reduce the financial aid award their children receive for college. However, most financial aid formulas ignore retirement savings. Also, IRA assets may be shielded from creditors. And IRAs also have estate-planning benefits, especially Roth IRAs.
As usual, with any financial issue like this, we’ll be glad to work with you on determining if any of these strategies will work for you and your family! Please keep in mind that this tip is designed to be of help for you, but is not to be relied upon as advice. It is merely a reminder that there are many choices you have available to you, and that planning is the only way to find the right answers for your situation! As with any financial issues, make sure you get the right information before making a decision! If you have any questions, we’ll be glad to help you!