Education

How much will my income need to increase to keep up with the cost of living?

 

If inflation averages 5%, how much will I need in the future?

 

Before I retire, is there a way for me to project my retirement income?

 

I may open a small business.  Will I pay more in Social Security Taxes than I did when I worked for someone else?

 

How do I manage the options in my 401(k), IRA, or pension plan?

 

Should I roll over to an IRA when I can leave my pension or 401(k) balance in my account and not pay any expenses?

 

When am I required to withdraw money from my Traditional or Rollover IRA?

 

I’ve heard that if I take my money from the company account, my employer will withhold 20%.  Is this true?

 

What are my biggest financial risks in retirement?

 

The idea of not working makes me uncertain about my (our) financial future.  How can I calculate that the assets I have accumulated will help me meet my needs for the rest of my life?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

How much will my income need to increase to keep up with the cost of living? The annual increase in the cost of living (as measured by the Consumer Price Index) has fluctuated, but has averaged between 4% and 5% over the past 20 years.  While recent inflation has declined to 2% to 3% annually, it is important to use inflation estimates for future income needs

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If inflation averages 5%, how much will I need in the future? Assume you retire at age 60 and need $4,000 per month retirement income.  Assuming 5% inflation, at age 65 you will need $5,105 to buy the same goods and services.  At age 70, this amount will rise to $6,515.  At age 75, you will need $8,315 to maintain the same purchasing power as $4,000, fifteen years earlier.

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Before I retire, is there a way for me to project my retirement income? With today’s technology, there are many financial strategy computer programs that are reasonably accurate.  Please seek the advice of a financial professional or Certified Public Accountant (CPA) that is experienced in retirement preparation.

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I may open a small business.  Will I pay more in Social Security Taxes than I did when I worked for someone else?  A self-employed person pays twice as much as an employee pays.  However, because the employer pays a matching amount, the combined rate paid by the employer and the employee is equal to the self-employment tax.  But there are special tax credits you can take when you file your tax return that are intended to lower your overall rate.

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How do I manage the options in my 401(k), IRA or pension plan?  Usually there are three choices, each with different advantages and disadvantages:
1) Leave it invested in what the company offers
2) Annuitize for pension payment that may or may not be adjusted for inflation
3) Roll over to an IRA or other pension fund, paying no taxes, and continue to defer the income tax

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Should I roll over to an IRA when I can leave my pension or 401(k) balance in my account and not pay any expenses?  While many investors do leave pension balances in a company sponsored account, many individuals prefer an IRA for a number of reasons.

First, the choices in the company account are usually limited to a handful of investment accounts while an IRA offers an almost unlimited number of alternatives and the ability to make changes frequently and easily.

Second, many retired investors find the service from a former employer or from a voice menu reached toll-free number to be less than adequate service.

Perhaps the most important reason retired investors choose an IRA is the personal attention and advice offered by a Financial Professional who is knowledgeable about the investment markets, financial strategies, and the needs of the retiree.

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When am I required to withdraw money from my Traditional or Rollover IRA?  By the end of the first quarter of the year that you become 70 ½ years of age, you must make your first “Required Minimum Distribution” (RMD) withdrawal from your IRA.  Source:  IRS Publication 590.

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I’ve heard that if I take my money from the company account, my employer will withhold 20%.  Is this true?  It is true.  If your company writes YOU a check a check for your pension or 401(k) balance they must withhold 20%.

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What are my biggest financial risks in retirement?  For many retired Americans the largest financial risk is the cost of health care, either in a hospital or long-term care provided in a facility or at home.

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The idea of not working makes me uncertain about my (our) financial future.  How can I calculate that the assets I have accumulated will help me meet my needs for the rest of my life?  Remarkably, many individuals work for up to forty years accumulating wealth, and then spend only a minimal amount of time analyzing and projecting their income at retirement.  A financial plan through a Financial Professional will focus on retirement strategies.

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