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 Americans who turn 65 will live nearly two decades longer on average than their parents did, giving them more time to pursue the things they've always wanted to do. That's exciting news if you're planning to retire, but to fully enjoy your retirement requires careful planning. The investment choices you make for retirement must not only meet your current financial needs, but tomorrow's as well. That's why it's wise to periodically review your asset allocation to make sure your investment holdings are diversified in order to optimize your risk management and protect your retirement assets. • Who Wants To Be A Millionaire • Retirement Planning Options • Managing Your Retirement Plan • Small Business Retirement Planning Who Wants To Be A Millionaire? Albert Einstein, when asked which was the most significant discovery of the 21st century, gave this somewhat surprising reply: "The principle of compound interest." Compound interest is what makes retirement saving plans so appealing to investors wishing to turn a small investment into a large nest egg over time. For instance, a contribution of just $2,000 per year from age 14 to age 18 (total investment: $10,000) can snowball into a retirement account worth well over $1 million by age 65, as interest is continually compounded with the principle.* The key to retirement planning is to begin making contributions at an early age, giving the principal and interest more years to compound tax deferred into a million dollars or more. To see examples of how this can be accomplished, click the "Example A" button. *-Assumes a 10% per annum return from income and growth. Hypothetical illustrations are not intended to reflect the actual past or future performance of any particular investment. Calculations do not include fees and expenses for securities products. •Example A: Who Wants To Be A Millionaire (CLICK) •Example B: Who Wants To Be A Millionaire (CLICK) Retirement saving accounts should be flexible in adjusting to your needs. As your potential earnings increase, you may wish to modify your strategy by increasing your contribution amount or extending the funding period. Regardless of the path you choose, the most important factor is to set up an IRA savings plan early and stick with it. Careful planning today can be the key to a successful retirement income tomorrow. A Matsock & Associates representative can help you establish realistic goals based on your present income and projected retirement needs. Retirement Planning Options Today, there are many retirement planning options available to you. Some are self-funded, while others are employer-funded. Keep in mind, however, that in most cases withdrawals must begin by April 15 of the year after you reach age 70 1/2, and withdrawals made before age 59 1/2 are subject to a 10 percent penalty. Retirement options generally fall into 10 main categories. • Defined Benefit Pensions are usually funded by your employer and provide a designated monthly benefit, beginning at your retirement date and continuing until you die. It is based on a percentage of your final salary multiplied by the number of years of employment. • Money Purchase Pensions are usually dispersed in the form of a lump-sum payment or a series of monthly payments. The employer is generally the major contributor to this pension plan, although some plans will allow employee contributions. • Profit Sharing Plans are funded by the employer with employee contributions optional, and are tied directly to your employer's long-term profitability. Benefits are normally dispersed as a lump sum at retirement. • Employee Funded Savings Plans are funded by the employee, although employers may make contributions as well. These savings plans provide a lump-sum payment upon retirement, and if a savings plan is set up as a 401(k) plan, employee contributions may be tax deductible. • Employee Stock Ownership Plans (ESOP) are plans where the employer contributes company stock toward an employee's retirement plan (often with diversification options at age 55, 60, etc.). • Individual Retirement Accounts (IRAs) are completely funded by employee contributions and are available to almost any salary or wage earner. Although contributions to Roth IRAs are not tax-deductible, Traditional IRAs may be tax-deductible, (ordinary income taxes are due upon withdrawl). Qualified withdrawls from a Roth IRA are tax-free and carry no penalty for withdrawl of funds in certain circumstances after a five-year holding period. • Keogh Plans are designed for self-employed people and funded completely by the wage earner. They offer the same investment opportunities as IRAs and contributions are tax deductible in most instances. • Simplified Employee Pensions (SEPs) are designed for small businesses, and are primarily funded by employers. The retiree gets either a lump-sum payment or periodic withdrawals upon retirement. • Savings Incentive Match Plans For Employees (SIMPLE) can be set up either as IRAs or as 401(k)s. In SIMPLE plans, the employer matches employee contributions on a pre-tax basis. • Annuity Contracts provide tax-deferred growth with no limit to contributions if non-qualified. These should be consideration to supplement an employer-provided retirement plan. Many of the options discussed above have limitations and restrictions that should be considered prior to investing. To learn more about the retirement options that are right for you, call us today at 1-800-733-0434, or you can initiate contact with a qualified agent right now on this website by simply clicking on the "Contact A Matsock Representative" button. Managing Your Retirement Plan Setting up a retirement plan-the earlier the better-is an important first step in planning for your future. Making sure than your plan is working to meet your specific retirement goals is perhaps even more vital. Are stocks, with the instability of the stock market, a safe place to invest? Would a money market account offer less volatility? Or would a diversified portfolio of the two work best for you? The ability to react quickly to changing conditions in the marketplace places you at a distinct advantage. Here are some general guidelines for safeguarding the health of your retirement plan: Diversify - It's always a good idea to spread your holdings among various investments (stocks, bonds, etc.) because it lessens your potential loss in any one investment. Don't Forget The Advantages Of Stocks - Although riskier than other types of investments the stock market with its potentially high yield can still be a very good place for your investment dollars. Explore A Guaranteed Interest Contract - Guaranteed interest contracts offer a set rate of return for a specific time period. They're usually backed by an insurance company. To find out how a prospective company performs in this area, consult the ratings directories in your local library (A.M. Best, Standard & Poor's, etc.). Review Your Plan Periodically - Always be ready to shift your assets based on your needs and changing market conditions. For more information on managing your retirement plan, call us today at 1-800-733-0434, or you can initiate contact with a qualified agent right now on this website by simply clicking on the "Contact A Matsock Representative" button. Small Business Retirement Planning As small business sales and profits continued to rise optimistically through the end of the twentieth century, many business owners assumed that their success would set them up for a comfortable retirement. With new advancements in technology, changing competitive pressures and new consumer demands, however, there is certainly no guarantee that the retirement fund you anticipate will be there when you need it. Today, there are many built-in advantages for retirement savings that small businesses owners can take advantage of. As a business owner, for instance, you may be able to set up and fund contributions to Keogh, SEP, 401(k), or SIMPLE retirement plans, using business assets from the company. Not only are there many attractive tax advantages to funding a company retirement plan, your retirement is not directly tied to the future earnings of the company. |
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