Retirement Mythbusters

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From paper routes and babysitting to corporate titles and entrepreneurship, you’ve covered work territory while earning a paycheck.

Although your teenaged self could not have imagined your career journey, your adult self needs to plan your retirement path.

“A retirement plan must be strategic, mindful and intentional. What does retirement look like to you?” says Ricka E. Neuman, CPA, principal, PBMares, LLP. While financial security is a given, having a clear picture of what you want to do next is equally important.

There is no one answer for everyone. “When people work on retirement plans, it’s not about preparing to retire,” says Michael I. Friedman, J.D., CAP®, senior vice president of philanthropic planning and services, The Associated: Jewish Community Federation of Baltimore. “It’s about preparing for a life in retirement.” The best time to map your tomorrow? Yesterday.

Shore Up Your Bank Account. Boomer, take your head out of the sand. Imagine living to age 100 and plan from there. Consider living expenses, health care, insurance and a retirement lifestyle. Then ask: Will my money last?

Start early; contribute often. Thanks to the power of compound interest, dollars add up. “I tell my clients to contribute a minimum of 10 percent of their pre-tax income each year,” says Morry A. Zolet, CFP®, senior vice president, the Zolet Lenet Group at Morgan Stanley. “You cannot afford not to contribute. Pre-tax contributions reduce your taxes and allow you to save.”

Vehicles such as a 401(k), 403(b), IRA or Roth IRA are relatively simple. Zolet urges employees to contribute enough to meet any employer match and go beyond to achieve at least 10 percent in pre-tax savings. While pensions and Social Security serve as a financial cushion, don’t count on one revenue stream, he adds.

Be realistic. Most people spend more in retirement than they imagine, whether for increased leisure activities or declining health, says Neuman. “Allow your tax-free savings to build-up as long as possible. Be strategic about taking Social Security. Be mindful about taking your required minimum distribution at 70½ for your qualified retirement plan.”

Ready for risk? Before retiring, you need to understand your existing assets and liabilities. You also need to know your risk tolerance, says Zolet. “How much volatility can you handle? Stocks go up and down in value, but there is more opportunity for growth.” Conversely, fixed-income tools such as bonds or CDs have less risk but also less growth potential.

At every age, saving something — even banking the cost of a latte each day — will help in the long run. “You cannot sacrifice your retirement for other needs,” says Zolet.

Plan Your Legacy. You’ve worked a lifetime and want to leave a legacy to your children and causes you support. Just as you planned your career, you can plan your philanthropic legacy by answering key questions and using the right tools, points out Philip “Pete” Sachs, partner, senior client advisor, senior strategist, WMS Partners.

“In addition to the financial aspects, think about what you want to give away, your anticipated tax burden and what you would like to bequeath to your children and to causes you supported all your life,” says Sachs. This is the time to consider:

  • What causes or issues matter most to you
  • How you want to be remembered
  • How to involve your family in charitable giving

Working closely with a financial advisor, you can create a legacy to reflect your values and take into account your means and abilities. Diverse planned giving approaches allow you to give to charity, while benefiting from tax savings and an income stream.

If selling your business or property is in your future, you may opt to pre-fund a donor-advised fund and receive a tax deduction, even if grants aren’t made out of the fund for months or even years later. The benefit is twofold.

“Many donors love using donor advised funds to help teach their children or grandchildren the value of giving by encouraging the succeeding generations to recommend grants — even small grants as little as $100 — to help their children or grandchildren get in the habit of giving,” says Neuman. Click to read full article.

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