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Best Financial Knowledge For Retirement Plan



Best Financial Knowledge For Retirement Plan

Best Financial Knowledge For Retirement Plan

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Best Financial Knowledge For Retirement Plan

“The investing world is certainly changing. The most common question I hear from my clients is, ‘What’s a good return on my savings?'” says Shlomo Bondar, MD, a clinical associate professor at the University of Maryland School of Medicine.
In this Article, Dr. Bondar explains what type of income you need in retirement and how you can calculate your retirement return to see how well you’re doing.
He also gives several tips on how to improve your investments in retirement to get more growth, rather than a flat, one-time payback.

Splitting Income

“You must define your core income and make sure you split it up between necessities, wants, and needs,” says Gail Scowcroft, financial planner and president of Captive Advisors, a Dallas-based fiduciary service firm that specializes in 401(k) plans and group retirement plans.
“It’s important to give yourself a feeling for what you want to spend and what you can afford and plan accordingly.”
If you’re living in retirement, your number-one expense is housing. That’s why it’s important to know how much you can realistically save each month to cover your housing costs.
Utilities, transportation, and food are your other biggest expenses. “There are many ways to split your cash flow and account for the discretionary expenses such as travel, entertainment, and entertainment expenses,” says Ms. Scowcroft.
Ms. Scowcroft recommends dividing your fixed and discretionary expenses evenly and then subtracting the required minimum distribution from your IRA to cover your housing costs, for example.
A portion of your income could be used to cover these costs on a cash basis. If you want to cover this expense with a lump-sum withdrawal from your IRA, the income-to-income ratios for qualified distributions from your IRA may be different than for withdrawals from a 401(k) or individual retirement account.
This is something you should ask your advisor before you take the distribution, according to Ms. Scowcroft.
If you’re in the workforce, get good advice and save enough money to cover your living expenses in retirement. If you’re older, you might need to move in with your children to cover the expenses.


“We have to really assess whether we’re going to save enough so that we have what we need in retirement,” says Stephen Connelly, vice president of retirement and investment strategies at Shaw Financial Services in Carlsbad, Calif. “There’s no way to make up for the Great Recession if you’re retiring in 2008.”
According to him, many people have more than enough savings today for retirement and there’s still time to make more contributions.
“In general, if you want to retire, your best bet is to save a lot of money in a traditional IRA or 401(k) or make some contributions to an IRA or a Roth IRA,” he says.
There are two other options that some people consider. “One is to use a more aggressive investment strategy and contribute to a Roth IRA instead of a traditional IRA.
Or, if you have a bunch of money left over in a traditional IRA or 401(k), you can put it in a taxable account,” says Mr. Connelly.

Factors to consider before beginning to work for retirement

The longer you’re in the workforce, the less chance you have of having enough money saved for retirement. “If you’re in the workforce and are 40 or 50, you have a really good shot of being able to retire with a plan,” says Ms. Scowcroft.
She’s referring to her benchmark question: Do you have enough money in your company retirement account, IRA, or another employer-sponsored account such as a 403(b) or 457(b)?
If your answer is no, it’s time to get serious about planning for retirement. “It’s not just that you need money saved for retirement. You need to make the time and the effort to start saving and to save more,” she says.
Ms. Scowcroft recommends building an emergency fund first. “If your household doesn’t have enough money set aside for an unexpected bill, you’re living above your means,” she says.
Next, make sure you have money set aside for expenses such as long-term care, health care, and retirement. Make these decisions early enough to take advantage of the benefits that are available, such as spousal coverage and various tax breaks.
Once you have an emergency and other short-term expenses covered, you’ll have time to invest in a retirement plan.
If you’re young enough to do this while you’re in the workforce, you’ll have a chance to put away a large portion of your income for retirement, says Ms. Scowcroft.
If you’re older, you can contribute to a Roth IRA, which is a retirement account with income tax benefits, as well as the ability to make regular tax-free withdrawals in retirement.
If you’re lucky, you’ll have a little extra income from Social Security to live on. Plan to make an even larger amount of money once you retire. “You can live off 70% to 80% of your previous income,” says Ms. Scowcroft. “That’s what’s really exciting.”
If you have a workplace retirement plan or a 401(k) plan that’s available to you, make sure you contribute enough to take advantage of the employer match. “That money will go further if you have it,” says Ms. Scowcroft.

Get more from your employer

One way to maximize the money in your retirement plan is to get more money from your employer. Ms. Scowcroft suggests you don’t “bank” retirement contributions. Instead, you should immediately invest those contributions into other investments or an IRA.
“Get your money out of your 401(k) plan before it has to do with paying you,” she says.

Make your own investment choices

“An adviser is going to tell you what to invest in and when to invest it,” says Ms. Scowcroft. That’s a better approach, according to her.
“You know yourself better than anyone else,” she says. “You know when you want to go on a vacation or buy a house, and it’s important to do it when you’re younger so you have more income coming in during your younger years,” she says.
The best time to make investment choices is now, as it will help you get a better return on your money.
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