For individuals who are close to the age of retirement, there is still much planning to do. It is important to take inventory of your resources to make sure you are on track to meet your retirement needs. In the United States, retirees traditionally rely on three primary sources of income for this stage in their lives, including: Social Security benefits, guaranteed pensions or employer-sponsored retirement plans and personal savings programs, such as bank accounts, IRA, real estate and other investments.
It may seem like you don’t have a lot of control over your retirement investments at first. The government is in control of your Social Security and your employer is charged with managing your guaranteed pension benefits. You do have some say over your employer-sponsored retirement benefits, such as a 401k or other optional investment vehicle, but the area that you have the most control is the “other” savings programs.
Individual Retirement Accounts or IRAs are by far the most popular form of retirement investment program available. However, there are other ways that you can save and plan for your retirement, even if it is just a few years away. Your credit union in New Bedford can help you go over your finances, take stock of what you have and where you are, then give advice on ways that you can maximize your savings in the final years leading up to your retirement.
Planning Your Retirement Budget
Despite all of your best planning, chances are high that you will be seeing less income in your retirement years than you do now. It is important to evaluate your spending habits and figure out how they will need to change as you prepare to enter into retirement. The reality that you need to consider is that your weekly or monthly paychecks from your employer will stop, but the need to spend for bills and daily living expenses won’t. This is why preparing for retirement spending changes will be most beneficial.
Your goals right now should be to:
1 – Get out of debt, pay off credit cards and get out from under those monthly payments.
2 – Pay off home loans or at least pay down your home loan and refinance it for a shorter term, while still lowering your monthly payment so that it will be affordable when you retire.
3 – Plan your estate and prepare for your future.
4 – Look at life insurance policy options.
5 – Set a retirement budget that will be realistic and manageable.
Social Security Benefits
How old are you? Some people plan on retiring young, but when you take your Social Security benefits early, beginning at age 62, you will be agreeing to take a reduced benefit. That needs to be considered in your plans. If you want to receive your full Social Security benefits, it is essential that you wait until you reach the full Social Security retirement age.
Currently, retirement age for Social Security is determined by your year of birth. If you were born before 1938 you can receive full Social Security benefits at the age of 65. However, if you were born between 1938 and 1959, you may not receive your full benefits until you are between the ages of 65 and 67, depending on the exact year you were born. If you were born after 1959, you won’t receive full Social Security retirement benefits until the age of 67. All this must be considered when making your financial plans.
Monthly Social Security Benefits vary per individual based upon the amount that you have paid into the program throughout your lifetime. You can find out an accurate estimate of your Social Security benefits by reviewing your personal Social Security statement, which is mailed to you each year approximately three months before your birthday. Information regarding a record of your earnings history, how much you paid into Social Security taxes and benefit estimates.
Individual Retirement Accounts (IRAs)
After reviewing your benefits, and the restrictions regarding those benefits, for your Social Security, the advantages to accumulating retirement savings accounts through your credit union in New Bedford in the form of an IRA or other type of retirement investments becomes crystal clear. You are in total control of your individual retirement accounts and retirement investments. You even have the ability to request a distribution at any time.
When you take money out of an IRA or any other type of retirement savings account, you will be paying taxes on the amount that you receive. However, there are some tax exceptions that you should be aware of with regard to these distributions. Amounts that represent your non-deductible dollars from a Traditional IRA are distributed tax-free. If you have a Roth IRA for over five years and you are over 59 and-a-half years of age, all distributions are tax-free.
It is also important to note that your individual retirement accounts distributions may be subject to a federal income tax withholding. However, you will usually have the ability to waive withholding on these amounts. You are not required to take any amounts from most IRA until the age of 70 and-a-half years of age and you are never required to take money out of a Roth IRA, regardless of age.
Improve Your Retirement Investments Today
Speak with a representative at your credit union in New Bedford to find out about all of the programs, retirement savings accounts and other retirement investments available to members. To join St. Anne Credit Union in New Bedford, you must live or work in the counties of Bristol or Plymouth in Southeastern Massachusetts. If you are not already a member, contact the local office for details.