Retirement. It is a word that sparks feelings of elation when you think about all that freedom you will get to enjoy! At the same time, hearing that word can feel like a kick to the gut when you don’t feel prepared. It takes a lot of planning to be ready for retirement, and it isn’t easy to know where to best invest your time and money. Here are three of the best-kept secrets in retirement planning that you don’t want to miss out on.
A ROTH conversion is when you transfer funds from a Traditional or SIMPLE IRA, or any qualifying retirement plan such as a 401(k), into a Roth IRA. There are several reasons for doing this. The key reason is that Roth IRA earnings are tax-free (as long as you have held onto your account for at least 5 years and you are at least 59 ½ when you claim your benefit.) Roth IRAs can also be passed on to your beneficiaries tax-free. On the other hand, Traditional and SIMPLE IRA and qualified retirement plans (QRP’s) are tax-deferred, meaning that you will owe taxes on your earnings when you retrieve your funds.
A Health Savings Account (HSA) is a fantastic tool for retirement planning. With the rising costs of healthcare, your medical needs in retirement can be one of your top expenses. With an HSA, you may have a high deductible, but HSAs are tax-advantaged. The money you put into your HSA can be deducted from your yearly tax return. Plus, with an HSA, the money on your account will roll over year after year. This allows you to build up your funds for future medical needs. Keep in mind, an HSA can be used for any qualified medical expense, including dental health care.
Wait to Retire
Social security can be an important, reliable source of retirement income. However, many people lose out on the full benefit because they retire too early. The benefits you receive depend on the age at which you retire. Retiring early can reduce each check you receive by up to 30%. On the other hand, by delaying your benefits, you can get up to 132% of your per check benefit! The Social Security Administration offers a free benefits calculator where you can find the exact benefits for each possible retirement age.
With the right planning, the idea of retirement should bring happy thoughts, not panicked ones. There are many ways to save for retirement—you just have to know what they are. Be sure to take full advantage of the benefits available to you!
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