S.T.E.P.S. - Smart, Tailored, Event-Driven, Packaged Solutions
provided by Women's Financial Network at Siebert
Retirement Planning --
Part IX
Believe it or not, no matter what your age, the time to start planning for your retirement is now. Newlyweds are often more focused on things such as buying their first home and paying off any looming wedding bills, but starting to plan for retirement immediately cannot be overlooked.
Employer-provided qualified retirement plans<
Often one of the easiest ways to save for retirement is to take advantage of any plans that may be offered through yours or your spouse's employer. Contribute as much as you can and be sure to ask about company matching. Remember -- a pension plan is an "easy" way to save because the money comes directly out of your paycheck. It's impossible to spend money you never receive!
There are two main options provided by employers:
1. Defined benefit plans -- A Defined Benefit Plan
gives you a predetermined monthly income stream (or benefit)
at retirement.
2. Defined contribution plans -- Defined contribution plans do not obligate the company to pay a certain pension benefit. Instead, you may choose a defined contribution that your employer may or may not match. These come in many forms, the most common of which is a 401 (k).
You are always subject to income taxes when you take money out of your retirement account. If you are under fifty-nine-and-a-half, you may be subject to an additional ten percent excise tax. Be sure that the money you put away can be kept away, because taking money out of a retirement account early may hurt your financial future more than help it!
It is up to the company you work for to decide which type is made available to you. Talk to your human resources department for details on what your company offers.
Individual retirement accounts (IRA's)
Outside of what you and your spouse are able to save through your employers, it is wise to contribute annually to an IRA or Roth IRA.
A traditional IRA is a popular and attractive proactive retirement investment strategy. Under current law, you can contribute up to $2,000 per year to your IRA. If either you or your spouse does not work, the working partner can contribute up to $2,000 per year into a spousal IRA. Because you are opening an IRA without the support of an employer, you are free to invest your IRA in a multitude of approved investments. In all cases, the earnings in your IRA are tax deferred. In other words, you won't pay taxes on income on your retirement funds until you retire or receive any disbursement.
Depending on your level of earned income and also whether you or your spouse are a participant in a qualified retirement plan, the contribution you make to your IRA may also be tax deductible. Deductions help lower your taxes by your marginal tax rate. So, the higher your tax bracket, the higher your tax savings.
For example, if you have contributed $100 to your pension and you have a thirty-two percent tax rate, then you can save thirty-two dollars on your taxes. If your tax rate is twenty-five percent then you can save twenty-five dollars from your taxes, and so on.
In any particular year, if your household income is less than $160,000 (married) or $110,000 (unmarried), you may want to consider another type of individual retirement account -- a Roth IRA. Although the funds inside of a traditional IRA grow tax deferred, they grow tax free in a Roth IRA.
Like a traditional IRA, you and your partner can each put up to $2,000 per year into a Roth IRA, even after you reach age seventy-and-a-half, but your tax contribution is not deductible from your income in the year that you make the contribution. Also like a traditional IRA, you are responsible for choosing your investment vehicles.
HerTip: If you had an existing retirement plan before you were married, you will most likely want to change the beneficiary to your new spouse.
Click here to get more information on the retirement products WFN at Siebert< offers.
Continue to: Part X: Insurance
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