The Retirement Age – Plan Ahead

In our current political events, President Bush has made Social Security reform a major media event. Whether you are for privatizing Social Security or not, there is one underlying theme you need to be aware of: even if Social Security funds do not run out by the time you retire, inflation will make what funds you receive insufficient as a sole means of income. With rising health care costs, insurance rates and the ever-increasing population, you will need to make sure that you start saving today in order to have a comfortable lifestyle later.

Saving for retirement has many immediate benefits. First and foremost is the peace of mind that you will have something stored away for that time when you want to enjoy the golden years. Another great benefit is the security of having savings now, in the event of a real emergency or catastrophic event in life. Also, some retirement plans allow you to borrow against the balance in order to purchase a main home. Saving for retirement now can only lend good things later.

Another of the great benefits to saving for retirement is the tax breaks that you can take advantage of every year you save. Adjustments and credits for retirement saving can lower your tax liability now. IRA’s, employer sponsored retirement plans, and other types of retirement allocations are generally made from pre tax income. If you are concerned about a rise in taxes later in life, this continued practice would help ease back the increase.

Roth IRAs are another great investment tool. While Traditional IRAs are funded with pre-tax dollars, Roth IRAs are funded with after tax dollars, so there is no immediate tax benefit. However, since you have already paid taxes on your contributions now, you don’t have to pay taxes on your contributions later in life when you start withdrawing the funds. Keep in mind that any earnings your contributions have made will be new income and be taxed at whatever the rate is at the time of withdrawal.

Talking with a financial advisor or tax professional will help you in deciding what options or combination of options are available to you and would help you both now and in the future. No matter how you choose to save money, do it and do it consistently. Remember that a penny saved is a penny earned and that penny can turn into a dollar in the right hands. Save for the retirement age, now and everyday!

 

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