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6 Important Questions to Answer When Planning for Retirement

Planning for Retirement Starts by Talking About These Key Questions

 

 

We all think about that day when we’ll finally retire, but some of us are more prepared than others. It’s true, you can overthink retirement –  but for most of us, planning for retirement involves careful consideration of many factors.

Whether you began thinking of these questions years ago, or haven’t thought of them for years, each is vital in planning for retirement:

1. When Should I Take Distributions?

All qualified retirement plans have specific requirements regarding when you need to take your distributions. For example, some plans allow you to keep your benefits after you’ve retired or have been terminated from your job. If your plan expenses are low and you have other income options, allowing these funds to continue to grow could be a good idea.

2. How Are Distributions Taxed?

If you’re withdrawing early (before you turn 59.5 years old), there will be a 10% tax penalty assessed, in addition to any federal and state income tax that’s due. Some plans allow exceptions, so be sure to check with your plan administrator or advisor.


3. Can I Rollover My Distributions?

If you’re getting a large distribution via a pension or profit-sharing plan, federal law allows you to roll it to an individual retirement account (IRA). Instead of just putting this money in your bank account and getting taxed, you are “sheltered” from the tax while it’s in your IRA account. Then, when you begin taking distributions, that money is subject to income taxes.

4. What About Tax-Free Options?

While all money will be taxed, some prefer to be taxed up front, which is possible with a Roth IRA or Roth 401(k). When utilizing a Roth, you don’t get the tax break up front, but the Roth does allow for tax-deferred growth and tax-free withdrawals in retirement.

5. What About Investment Limitations?

Fortunately, when investing with an IRA, you have few limitations. You can invest in CDs, stocks, bonds, mutual funds or money market funds. However, talk to your investment advisor and make sure you have the options you need to best fit your strategy.

6. Do I Need an Advisor?

You’re not required to have an advisor assist you in planning for retirement or in managing your investments. However, paying modest fees can provide huge benefits on your investment in an advisor.

Perhaps just as valuable (if not more) is the peace of mind and confidence you can experience from not trying to D-I-Y important and life-changing investment decisions. Let’s put it this way … you wouldn’t try to fix a major plumbing problem yourself. You would hire an expert because you want the task at hand managed as effectively and efficiently as possible. And it will free up time for you to do things you enjoy. It’s similar when you hire a professional advisor (especially when you work with one who operates within a commission-free, client-focused setting).

To talk about these questions and others in a jargon-free environment, contact Family Investment Center today. Let’s sit down and determine what your kind of retirement freedom looks like and how you’ll get there.

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