Saturday, 19 October 2019

Investing Basics: Planning for Retirement

Planning for Retirement

Retirement is something we all look forward to, a time when you can kick back and relax. We all know the goal of retirement savings, to have enough money to cover our expenses and to have a little leftover for the fun stuff. What is tricky is knowing the best way to pursue those goals, like,

Let's go over some retirement planning basics

To plan for retirement, you need to decide three things
  1. Your Savings Goal
  2. What Type Of Retirement Account You'd Like To Open
  3. How You Will Manage The Money In Your Account.

Let's Get Started


Savings Goal

  • When?
  • How Much Do I Need?
  • How Much Should I Save?

Creating a retirement plan helps you figure out when you are going to retire and how much money you will need to live comfortably. By identifying how big your nest egg should be, you will be able to determine how much you need to save each month and how to allocate your investment.

One quick way to come up with a retirement savings goal is by using a retirement calculator. These calculators are easy to find online and are usually free to use. By answering a few basic questions like your age and how much you plan to save each month, you can then estimate how much money you will have when you retire.


What Type Of Retirement Account You'd Like To Open

  • Broker 
  • Financial Advisor
  • Tax Person

After establishing a savings goal, your next step might be to open a retirement account. Be sure to talk with your broker, financial advisor or tax person, to discuss what kind of retirement account might be right for you.

There are a number of different retirement accounts available. 
  • Employer-Sponsored Account - 401k
  • Individual Account - Roth IRA

Read: 401k vs Roth IRA: Which Option Is Better To Invest?

Let's examine some of the common most retirement accounts are either employer-sponsored or individual accounts.


  • Employer-Sponsored Account
  1. Automatic Paycheck Withdrawal
  2. Tax Benefits
  3. Contributions Matching
  4. Limited Investment Choices

This is a retirement account offered by a company to its employees. One example of these is a 401k retirement savings plan, employer-sponsored accounts can provide a number of benefit including automatic paycheck withdrawal and tax Benefits. Some company even match part of its employee's contributions

One drawback to employer-sponsored accounts is that your choice for how you'd like to invest your money may be limited. 

If your employer offers any retirement benefit, you should examine the details to determine whether opening an employer-sponsored account is right for you.

If your employer does not offer any of these benefits or if you would like to supplement your existing retirement savings with another account that offers more investment choice, then you may want to open an individual account.


  • Individual Account - Roth IRA

  1. Roth IRA - Today Tax Duel
  2. Traditional IRA - Even Retire Tax Duel

One of the primary benefits of an IRA is, it allows your investments to grow tax-deferred. In an IRA, you can typically invest in a wide variety of products
  • Stocks
  • Bonds
  • Mutual Funds

There are several types of IRA, let's compare two of the most common, a Roth IRA and a Traditional IRA. When choosing between the two, the primary question you need to ask yourself is, do I want to pay income tax now with the Roth IRA or later with the traditional IRA.

With the Roth IRA, you pay taxes on your contributions now. However, with a traditional IRA, you are not taxed on your contributions. Instead, you pay taxes when you reach retirement age, and begin withdrawing money from the account.

But it's worth noting that if you also contribute to an employer-sponsored retirement account, contributions to a traditional IRA may not be deductible, so which tax benefits are better for your retirement savings? Well, that depends, do you think your income tax rate is higher now, or will it be higher when you reach retirement.

if you expect the income tax rate to be higher when you reach retirement, a Roth IRA may be preferred, however, distinct tax implications represent just off of the differences between a Roth and a traditional IRA.

Be sure to investigate all the details of each IRA before you open an account. 


How You Will Manage The Money In Your Account.

Once you've open a retirement account and started making contributions, the final step is deciding how you will invest your money. Your choice depends on how actively you want to manage your portfolio, you want to actively manage your investment yourself or would you prefer to leave your investing up to a financial professional.

Maybe you are somewhere in the middle, check what services are available with your retirement account, many institutions provide a variety of choice that allows you to be as active as you would like when it comes to your retirement investing.

Now that you know a few basics about retirement planning, the next step is up to you.


  1. Set Your Goal
  2. Establish Your Retirement Account
  3. Start Saving.

The best time to start saving is today.

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