Establishing a Robust Retirement Budget: Prioritize creating and updating a budget to accurately forecast and manage retirement expenses, ensuring financial readiness for your non-working years.
Organizing Finances and Debt Reduction: Simplify finances and reduce debt with personalized banking and lending solutions from Consolidated Community Credit Union
Seek to Optimize Investments: Focus on regularly evaluating investments to pursue efficient growth of retirement savings and diverse investment opportunities.
Perhaps your youngest child recently moved out of the house, or maybe you have just welcomed a new child of your own. No matter the reason you have retirement on your mind, you should seek to set the foundation for financially stable, happy retirement living so you can enjoy your grandkids, your empty nest, or travel to your heart's content.
Americans are not saving enough for retirement. As few as 1 in 4 Americans have no retirement savings – and those who do are not coming close to saving enough for what is to come, according to Stephanie Asymkos, yahoo! money reporter.
Take control of your future and consider these IRA tips to help you reach your ideal retirement lifestyle.
An IRA, also known as an Individual Retirement Account, is one of the most common retirement saving accounts. There are two main types of IRAs, a Roth IRA and a traditional IRA. They differ mainly in how and when your money is taxed. When you contribute to a traditional IRA, your contributions are tax-deductible, but your withdrawals in retirement will be taxed. Contributions to Roth IRAs on the other hand are not tax-deductible, but when you reach retirement, your withdrawals will be tax-free.
There are many other intricate details that differentiate a Roth from a traditional IRA. Determining which IRA is right for you depends on many unique factors including your personalized investment goals and objectives, your timeline for meeting those goals, your cash flow needs and your financial resources. If you are considering utilizing an IRA as part of your retirement strategy, CCCU recommends consulting with a Financial Services Representative to find the best solution for your needs.
Picking a target number for how much you should save for retirement depends on lots of factors: your average cost of living, the age at which you plan to retire, extra expenses you might have in retirement (travel, a vacation home, or medical expenses), and how much you can expect to receive in social security. A good rule of thumb is to assume you should save 10% to 15% of your pre-tax income each year, although depending on your age and when you started saving, this number could vary.
The IRS limits the amount which individuals are allowed to contribute to their Roth and traditional IRAs annually. Speak with a Financial Services Representative to get the most up to date numbers on your maximum contributions which may vary depending on your age, tax filing status, income and if you are covered by an employer-sponsored plan at work such as 401(k) or 403(b).
If you accidentally contribute more than the allowable annual contribution to your Roth or traditional IRA, you will have what is called an excess contribution, subject to a 6% tax penalty. You can undo an excess contribution by withdrawing the excess funds prior to filing your tax return.
Roth IRA contributions are not deductible. Traditional IRA deductions might be limited if you (or your spouse, if you are married) have a retirement plan at work and your income exceeds specific levels. Traditional IRA deductions are allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work.
Review the IRS chart showing the income range in which your deduction may be disallowed if you or your spouse has and is active in a work retirement plan.
Before age 59 1/2, distributions are considered early withdrawals, and different rules regarding IRS taxes and penalties apply to these distributions. These penalties vary based on the reason for the early withdrawal such as medical expenses, down payments on a mortgage, higher education expenses, and others.
If you are considering an early withdrawal, speak with a Financial Services Representative regarding the taxes and penalties you will owe. After age 59 1/2, distributions will only be subject to tax, depending on which IRA you have chosen, but not penalties. By age 72, IRA holders are required to take a required minimum annual distribution (RMDs), the amount of which is determined by the IRS.
Maximizing the money you set aside for retirement doesn’t mean you have to slash spending and go without little extras, travel, and other positive experiences. By applying the same frugal habits that helped build your nest egg, you can make it last.
Consider taking advantage of credit card rewards programs, mileage points, senior discounts, and shopping at wholesale outlets like Costco and Sam’s Club, among others. And now that your lifestyle isn’t quite so hectic, book travel based on reduced rates rather than paying a premium. Anytime you can save money, you stretch retirement savings further.
You do not want to compromise your ideal retirement living due to poor planning. Take charge of your retirement today. CCCU Wealth Management offers retirement, insurance, and investment programs designed to help you and your family through a lifetime of financial planning needs.
Contact CCCU Wealth Management to learn more about strategies for securing the lifestyle you want by funding your retirement today.
Disclosure: Contributions to a Roth IRA are taxed in the contribution year. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
