George S. May Business Blog

3 Retirement Tips

Thinking of retirement? Well if you aren’t you probably should. Here are a few tips to help save for your golden years.

IRA’s

I found a definition for an IRA (Individual Retirement Account) on www.entrepreneur.com that I felt explained it fairly simply but well:

A personal retirement savings vehicle created by the Tax Payer Relief Act of 1997. A Roth IRA allows certain investors to make non-deductible contributions of up to $4,000 annually and, provided certain requirements are met, offers tax-free and penalty-free withdrawals for important financial needs in addition to retirement.

In other words, you can save your money and only pay the IRS when you take money out (retirement). Depending on the income of your household, you may also qualify to claim tax deductions for any contributions you made to the plan. For non-Roth IRA’s those under 50 are allowed to contribute $5,000 annually and $6,000 is allowed for those over. Also, many married couples do not realize that they can open a separate Roth IRA for a non-working spouse:

There is an exception that allows Roth accounts for nonworking spouses. If you and your spouse file a joint return but one does not work, the employed spouse can open and contribute to a Roth IRA for the unemployed partner. (www.bankrate.com)

For detailed information as to the certain rules and regulations to owning a Roth IRA, visit: http://www.irs.gov/pub/irs-pdf/p590.pdf

Target Date Funds

A target date allows you to link your investment portfolio to a particular time horizon, typically your expected retirement date. Target Date Funds will offer different risk profiles that investors can shift their funds between in order to manage risk effectively as they move from youth to middle age to retirement. How do they do that? Well, every fund company will create their own scheme, weighing their risk individually, however, generally the plan is to focus on growth at first (aggressive asset allocation) and then later in life become more conservative.

Note: the fees you pay for a target date fund will, almost always, be higher than you would pay to own each of the individual funds separately. What you are paying for that additional level of professional oversight.

Stay In Shape

No, not financially, physically. As you become older, your main expense could prove to be on health related bills. As reported by the National Coalition on Health Care

Retiring elderly couples will need $200,000 in savings just to pay for the most basic medical coverage. Many experts believe that this figure is conservative and that $300,000 may be a more realistic number.

Fidelity computed that “a couple currently in their mid-60s who aren’t covered by employer-sponsored insurance for retirees could spend roughly $215,000 on out-of-pocket medical expenses by the time they’re 85 years old“.

Whatever the exact numbers are, the bottom line is the healthier you are, the less you will need to see a doctor, and the less you will have worry about paying your doctor bills.

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