Home > Marriage > Money > Are You Ready—for Retirement?
Are You Ready—for Retirement?
It's never too early (or too late) for couples to plan for their financial future.
Scott Kays | posted 9/30/2008
 2 of 6
The final source of retirement income is the most important and the one over which you have the most control—personal savings! One of the most important disciplines you can develop is setting aside a percentage of every paycheck into an investment account designed to provide you with income at your retirement. Individual Retirement Accounts (IRAs) are designed to help individuals save money specifically for their retirement years on a tax-deferred basis. Individuals are allowed to contribute up to $2,000 per year into an IRA. Money that would normally have been taxed as investment income is not taxed until it is withdrawn from the IRA, which may not be for many, many years.
The Taxpayers Relief Act of 1997 made a new type of nondeductible IRA available: the Roth IRA. All contributions to a Roth IRA are made on a nondeductible basis. Investment gains accumulate tax-free within the account. That's right—unlike existing nondeductible IRAs, subject to certain conditions, individuals will have the ability to withdraw money from their accounts completely tax-free. Talk to your tax advisor to see which account would be best for your family.
Generally, I also recommend taking full advantage of the 401(k) plan (or 403(b) plan for nonprofit organizations, schools, and hospitals) your employer offers. In a 401(k) plan, employee contributions are tax-deductible. Many times employers will match employee contributions up to a certain amount. Assets within the plan grow tax-deferred until they are withdrawn.
A financial planner can calculate the amount you need to save each month to reach your retirement income goals. But here are the general guidelines: If you are in your late twenties or early thirties and are just starting to save for retirement, you should set aside about 10 percent of your monthly gross income. If you are in your late thirties or early forties, you need to bump that figure up to approximately 15 percent of your income. Ratchet it up to 20 percent if you are in your late forties or early fifties and just getting started. Finally, if you are one of the unfortunate ones who are older than that and are just now accumulating assets for retirement, it is unlikely you will be able to save enough to become financially independent by age sixty-five. Extending your career a few years may be necessary to secure an adequate retirement income.
Investing
Once you have completed step one and set up a savings plan, you must decide where to invest the nest egg you are building.
Buying a home. Without a doubt, the first investment you need to make is the purchase of your personal residence. The benefits of owning a residence as opposed to leasing are enormous.
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