Financial and Retirement Planning

Financial and Retirement Planning can be far more challenging today than for previous generations. People are living longer, lifetime income pensions are becoming obsolete, and the investment strategies available are increasingly more complex.

A solid financial strategy will help you:

  • Prepare for a secure, comfortable retirement with tax-efficient income
  • Proactively manage and control debt – from major purchases to preparing for a child’s post-secondary education
  • Provide for your loved ones in the event of death, disability or critical illness
  • Protect your business and your employees through strategic benefits

Some of our most common planning points are detailed below.

Lifetime Income Need

People are living longer, which means some people will be retired for 20 years or more. Enjoying a longer retirement prioritizes the need to provide for a steady stream of income that cannot be outlived. 

Paying for Retirement

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 and investments. A sound retirement plan will emphasize qualified plans and personal savings as the primary sources for steady income with Social Security as a buffer.

Health Care Costs and Needs

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 a key element of retirement plans today. For some additional information about long-term care insurance, visit our Insurance page.

Estate Protection

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. You can find helpful tips and suggestions for Estate Planning here.

Traditional and Roth IRAs

The Traditional IRA (Individual Retirement Account) allows for contributions to be made on a tax-deductible basis and to accumulate. Earnings inside the IRA are not taxed – only when the funds are distributed from the IRA account are those funds subject to taxes (tax-deferred interest). 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.

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.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Employer-Sponsored Qualified Plans

Most employer-sponsored plans today allow for an employee to assign a percentage of earnings to be contributed 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 when the employee plans to retire. 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 or a Simplified Employee Pension Plan. Government entities may offer a Thrift Savings Plan or 457(b) and a non-profit organization may offer a 403(b) plan. Our firm will help you understand the plan options available to you and how to manage those assets post-retirement.

Social Security

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 amount paid out 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 in order to receive a larger benefit later. Conversely, early retirement benefits are available, at a reduced level, as early as age 62.

Planning doesn’t have to be complicated. Let us show you how to get started.