Investing 101

Rather than taking early withdrawals or retiring at the first opportunity, you may want to consider postponing retirement for a few years. It’s one of the most effective ways to ensure greater financial security as you grow older. You may also avoid the penalty by setting up a program for regular annual withdrawals over at least a five-year time frame or until you turn 59½, whichever period is shorter.

Investment Guide

Your earnings aren’t taxed until you withdraw them from your account, usually after you leave the workplace. If you are from least 59½, there is not any fees for taking money out there, even if you will be still working. Once you get involved in a 401 program, you defer pre-tax revenue to your account every single pay period, typically by simply designating a portion of just what you earn. The deferred earnings aren’t within the low income your employer studies to the IRS, which often actually helps you help save by reducing the revenue tax you owe for your year. Two potential options for retirement income, pensions in addition to Social Security, are keyed to your lifetime regarding work.

And while traditional IRAs require you to take withdrawals after you turn 70½, you may have more control over managing how you take those withdrawals than you do with a 401, 403, or 457. With a traditional IRA, you must begin to take required minimum distributions when you reach 70½, whether or not you need the money. You also must stop making IRA contributions at that age, even if you continue to earn income.

The cost of maintaining your household is likely to take the biggest bite out of your retirement income. Some of these expenses are more or less fixed, so it’s easy to budget for them but harder to economize. Typical expenses include mortgage or rent payments, car payments, basic telephone service, utilities, property insurance, and taxes. While you do have to set up an IRA with a custodian, once your account is established you can arrange to have money from your paycheck or checking account transferred directly into your IRA on a regular basis. An IRA is likely to have more investment choices than a 401, 403, or 457, and IRA fees may be lower than you would pay in an employer’s plan, sometimes significantly so.

For every Bernie Madoff you read about, there are legions of other scammers at work devising ways to lure you into their investment schemes and make off with your hard-earned dollars. The key is to delay touching your principal for as long as possible.

After you turn 70½, however , you’ll need to take at least your annual required minimum distribution. Before you begin to withdraw from your retirement accounts, you should determine the amount you’ll need and decide which accounts you’ll tap first.