Retirement planning is the process of planning for one’s income needs during retirement. Usually, there are three main sources of retirement income Social Security, Employer qualified retirement plan benefits, and Personal savings and investments.
Retirement planning consists of positioning the resources from all of these to assure a financially rewarding retirement.
Beyond Social Security
The Social Security system provides significant retirement benefits for the vast majority of American workers. However, this program was never intended to be an individual’s sole means of support after the working years have ended. Recognizing the importance of retirement planning, the U.S. government has provided tax incentives for the creation of employer-sponsored retirement plans that qualify for favorable federal income tax treatment—hence the name qualified retirement plans.
Traditional IRAs as a general rule have more restrictions and requirements than do other forms of investments such as Roth IRAs and annuities.
There is a limit on the contributions you can make each year to your IRA. Placing money in a traditional IRA account not only helps you save for retirement, but it also allows you to defer taxation on some of your income.
The traditional IRA is a good choice for anyone who is likely to be in a lower tax bracket when they reach their retirement years than they are during their working years. Still, for some people the advantages of the traditional IRA can outweigh the disadvantages. It is important to consider all of the various advantages and disadvantages of the traditional IRA and examine them in the light of your personal financial situation.
Simply put, the money that you invest into your Roth IRA is placed in an annuity through which it is invested in a selected fund, bond, or stock. A Roth IRA is a tax sheltered account, but contributions are not tax deductible.
By investing into an annuity through your Roth IRA, you can obtain the guaranteed income that comes along with an annuity but also have the tax-free withdrawals that come with investing in a Roth IRA. You will also be bound by the contribution limits of the IRA rather than investing the amount of your choosing, as with a regular annuity.
To choose the right IRA, take the time to discuss all of your retirement income needs with one of our Advisors. Complete the request form for a free consultation.