CHARTING THE COURSE FOR YOUR
At Navigation Financial, we encourage retirement planning and will help you identify effective ways to address retirement related issues such as income sources, income requirements, spending needs, inflation, taxes, probate laws, healthcare issues and social security needs.
LIFETIME INCOME NEED
HEALTH CARE NEEDS
PAYING FOR RETIREMENT
EMPLOYER-SPONSORED QUALIFIED PLANS
TRADITIONAL AND ROTH IRAs
Because of longer life spans, we enjoy a lifetime after retirement, which means the need to provide a steady stream of income that cannot be outlived is more important than ever. With the prospect of paying for retirement needs for as many as 20 years or more, retirees need to be concerned with maintaining their standard of living.
Longer life spans can also translate into more health issues that arise in the process of aging. The federal government provides a safety net in the form of Medicare; however, it may not provide the coverage needed especially in chronic illness cases. Planning for long-term care, in the event of a serious disability or chronic illness, is becoming a key element of retirement plans today.
Planning for the transfer of assets at death is a critical element of retirement planning, especially if there are survivors who are dependent upon the assets for their financial security. Planning for estate transfer can be as simple as drafting a will, which is essential to ensure that assets are transferred according to the wishes of the decedent. Larger estates may be confronted with settlement costs and sizable death taxes which could force liquidation if the proper planning is not done. If you have a "special needs" situation, we can assist with properly structuring your estate assets.
Retirees who have prepared for their retirement usually rely upon three main sources of income: Social Security, individual or employer-sponsored qualified retirement plans, and their own savings or investments. A sound retirement plan will emphasize qualified plans and personal savings as the primary sources with Social Security as a safety net for steady income. We can assist you in preparing a sound distribution plan to provide you comfort and security that you will be spending your retirement assets wisely so as to increase the likelihood your assets will last throughout retirement.
Social Security was established in the 1930’s as a safety net for people who, after paying into the system from their earnings, could rely upon a steady stream of income for the rest of their lives. The age of retirement, when the income benefit starts was, originally, age 65 which was referred to as the “normal retirement age”. Now, for a person born after 1937, the normal retirement age is being increased gradually until it reaches age 67 for all people born in 1960 and beyond. The amount paid in benefits is based upon the earnings of an individual while working. If a person wanted to continue to work and delay receiving benefits, they could do so and build up a larger benefit. Conversely, early retirement benefits are available, at a reduced level, as early as age 62. We can help you make decisions regarding your social security benefits that will meet your needs and best fit into your overall plan.
Most employer-sponsored plans today are established as “defined contribution” plans whereby an employee contributes a percentage of his earnings into an account that will accumulate until retirement. As a qualified plan, the contributions are deductible from the employee’s current income. The amount of income received at retirement is based on the total amount of contributions, the returns earned, and the employee’s retirement time horizon. As in all qualified plans, withdrawals made prior to age 59 ½ may be subject to a penalty of 10% on top of ordinary taxes that are due. Depending on the size and type of the organization, they may offer a 401(k) Plan, a Simplified Employee Pension Plan or, in the case of a non-profit organization, a 403(b) plan. Your plan may also have a Roth contribution option. We can help you with your plan options and whether an IRA rollover may be appropriate for you when you change jobs or retire.
Individual Retirement Accounts (IRA) are tax qualified retirement plans that were established as a way for individuals to save for retirement with the benefit of tax favored treatment. The traditional IRA allows for contributions to be made on a tax deductible basis and to accumulate without current taxation of earnings inside the account. Distributions from a traditional IRA are taxable. A Roth IRA is different in that the contributions are not tax deductible; however, the earnings growth is not currently taxable. To qualify for tax-free and penalty-free withdrawals of earnings, a Roth IRA must be in place for at least five tax years and the distribution must take place after age 59 ½ or due to death, disability or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Distributions from traditional IRAs and employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching 59 ½ , may be subject to an additional 10% federal tax penalty.