Individual Retirement Planning

When you are in the 50s, your children have already established their own families; it's high time for you to start planning your retirement. One more thing that contributes to the idea of planning one's retirement is that when you are in the 50s you are probably at the highest income level of your life.

10 Easy Steps to Plan your Retirement

1. Learn your needs The first thing you should do is estimate the level of expenses during your retirement. The factors that affect your calculations might be traveling, expensive hobby, purchasing estate property etc. Plan your expenses keeping in mind that some of them might increase, while the others go away.

When calculating your retirement expenses take into account your lifestyle. Do you know what you want to do while retired? If you do, think over the expenses it might provide, if not - make a list of probable hobbies and affairs.

2. Learn your Social security benefits An average retiree gets 40% of his/her pre-retirement earnings.

3. Find out your employer's pension plan Most employers provide an individual benefit statement if you request one, still you'd better learn the details of the employer's plan. It is even more important if you change jobs. Find out what is going to happen to your pension charges. Moreover learn what benefits you can get from your spouse's retirement plan.

4. Find out about tax-sheltered plan If your employer provides a tax-sheltered plan (e.g. 401(k)) learn all you can about it. If you are in, your taxes will be lower. But at the same time the amount you accumulate is affected by deferral of taxes and compounding of interest.

5. Does your employer offer a plan? Some of the employers don't offer plans at all. If this is the case with your employer, ask him to start one (e.g. a simplified plan).

6. Put money into IRA There are two major kinds of IRA: Traditional IRA and Roth IRA.

Traditional IRA features: � You don't have to pay taxes until your retirement � You can contribute up to $4000 a year (after 50 the amount of annual contributions increase up to $5000) � You cannot make any contributions after your are 70.5 years old � You can make some kinds of withdrawals from your account (e.g. higher education expenses)

Roth IRA features:

� Contributions are made with taxes � The limits of annual contributions are the same as Traditional IRA � No age limits for contributions � No required minimum distributions

7. Don't use your savings blindly If you use the savings before retirement, you are likely to lose principal and interest besides tax benefits

8. Start this very moment Don't delay creating your retirement plan. The earlier you start the more money you will accumulate. Make retirement contributions your high priority.

9. Learn the basic investment rules The way your savings are made matters! The inflation and the type of your investment affect the total amount of money you'll in the end. So get the basic knowledge of how your retirement plan is invested.

10. Don't be afraid to ask questions These basic tips will set your directions, but won't do anything for you. Don't be afraid to ask questions to your employer, bank manager, and remember that it is your future that is at stake.

Individual Retirement Accounts (IRA)