When we speak of retirement, we are usually referring to old age. Retirement is the voluntary withdrawal from one’s current position or profession or from one’s occupational active life. There are two basic types of retirement: full retirement and partial retirement. In a full retirement, an individual has retired from work and no longer has to render service to their employers; he/she is, however, entitled to receive pension, health care, and social security upon retirement. Partial retirement is when an individual continues to render service to their employer but stops short of completely retired.
Full retirement age is 62 for males and 65 for females. Retired individuals can continue to receive Social Security retirement benefits until the age of 75. If you have reached this age, you may be eligible to receive retirement benefits based on the retirement plan you have chosen. Social Security retirement benefits are the most common type of retirement benefits. Retired individuals can withdraw a portion of their social security retirement fund. You may also withdraw a portion of your private sector retirement funds, depending on which particular fund has been professionally invested in to help you reach your retirement goals.
If you have already reached full retirement age, it is advisable that you consider a traditional, inflation-adjusted, IRA-managed retirement savings plan to help you reach your financial goals. IRA is a good investment for building retirement savings because of the tax-deferred features it boasts. Traditional IRAs feature higher annual contributions and lower overall returns than the Roth. However, the Roth allows you to invest for the lifetime of your retirement account without taxation of earnings and capital gains.
As you become more mature and you move into earning and spending age, you may need to rethink your financial planning and consider other alternatives to investing in your future. The Roth is ideal for this purpose, as the tax-free status extends to investing in your retirement account, whereas a traditional IRA requires immediate tax payments upon retirement distributions. You may also be concerned about potential inheritance tax issues. If you plan to leave a spouse or children financially supporting parents, you might need to include the value of your IRA in their estate plan. In addition, if you have already taken out a retirement plan through your employers, an employer may provide you with a supplement to your Social Security benefits to help you reach retirement benefits.
Planning for the Future
If you are still young, you may be eligible for some of these options, depending on your age and current health status. There are several ways you can contribute to retirement plans and save for your future. Fulltime workers over the age of 22 with at least a high school degree who are working in jobs that offer a cafeteria service are eligible to participate in cafeteria plan programs. If you do not work in a job that offers this benefit, you may want to consider IRA-matched retirement plans, which allow you to make automatic, pre-tax contributions to retirement plans each month based on your earnings. For self-employed individuals, IRAs allow you to contribute funds to a traditional or Roth IRA account, depending on your preference. Lastly, there are self-directed IRA accounts that allow you to control your own investments; however, you cannot contribute any tax-derived funds to these types of plans.
In general, you should define retirement benefits as those features which you expect will be most important once you stop working. These features may include medical insurance, travel expenses, spousal and child support, home ownership, and other similar items. Another item to consider is your level of discretionary income. This may be your salary or expected increase in pay plus expected life expectancy, as well as other standard savings and investment gains. In order to reach a comprehensive financial plan, it is wise to consult a financial consultant who can help you assess your specific needs and create a plan that will help you reach your goals.