Investment Strategies for Retirement Income
Planning for retirement is no longer a matter of simply working for the same company for 20 or 30 years and collecting a pension at the end of it. These days, few workers can count on those fat pensions, and it is up to every worker to save for their own post-work life.
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Guaranteed Income
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When deciding how much you need to save for retirement, it is helpful to first look at the guaranteed sources of income you can rely on when you stop working. These guaranteed sources of income can include pensions, annuity payments and Social Security. The more you have in guaranteed streams of income, the less you have to save on your own. But simply having a guaranteed income does not mean you do not have to save any money at all. It just means you can concentrate on those retirement savings programs that give you the biggest present and future benefits. These sources can include the 401(k) provided by your company, especially if the plan includes a company match, and a Roth IRA, which can provide tax-free income for life.
Workplace Investing
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If you have access to a retirement plan through your employer, it is a good idea to take advantage of that plan. A retirement plan like a 401(k) or a 403(b) provide a number of important benefits, including tax savings and an immediate return on your investment. If your employer provides a company match, for instance, you can enjoy an instant return of 50 percent or more on your savings, something that wold be difficult to match anywhere else. In addition, every dollar you invest is deducted from your taxable income, providing an even stronger reason to participate in the plan.
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IRA Accounts
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You can supplement the money you put into your 401(k) or 403(b) plan with a traditional or Roth IRA. If you choose a traditional IRA, you can deduct the amount you invest when you file your taxes, providing you with an immediate tax benefit and helping you make the most of your retirement money. If you choose a Roth IRA instead, you give up that tax deduction, but you get the ability to withdraw the money tax-free when you reach retirement age.
Track Your Progress
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Retirement is not a set it and forget it proposition. In order to stay on track, you need to constantly evaluate and track your progress. Reviewing each of your retirement accounts, including 401(k) plans, IRA accounts and personal savings, on at least an annual basis is the best way to ensure you are on track to enjoy a financially secure retirement. You should also review the statement you receive from the Social Security Administration each year for an estimate of how much you can expect to receive at various retirement ages. If you are in line for a company pension, you should carefully review those statements as well.
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