Lehigh Valley Woman – Finance Section – April / May 2014

by Laurie A. Siebert, CPA, CFP®, AEP® Senior Vice President, Valley National Financial Advisors

I have a show on WDIY called “Your Financial Choices” and on February 26, I did a show on Retirement Accounts. The show generated a lot of interest and I realized that while so many women are in charge of the money, they may not be taking care of their own retirement needs. It seems like someone else, or other needs, always come first.

The Facts
Fewer than half of Americans know how much income they will need in retirement and even fewer parti cipate in defined contributi on plans such as 401(k) plans. How will we live in reti rement if we don’t spend a little time thinking about how this will happen?

Planning starts today. Putti ng money away today will compound and that compounding helps you along. The more you let your savings and earnings work for you, the faster you will get there.

Resources
The Department of Labor has ample information on its website to help you get started. A brochure they have ti tled, “Top 10 Ways to Prepare for Reti rement,” is found on their website at www.dol.gov and offers several key steps:

1. Start saving, keep saving, and stick to your goals.

2. Know your reti rement needs.

3. Contribute to your employer’s reti rement savings plan.

4. Learn about your employer’s pension plan.

5 Consider basic investment principles.

6. Don’t touch your reti rement savings.

7. Ask your employer to start a plan.

8. Put money into an Individual Retirement Account.

9. Find out about your Social Security benefits.

10. Ask questions.

Ideas
In addition, working with a financial advisor may help you take it to the next level. If you can’t get your arms around how to save or knowing what your retirement needs are, there are professionals specially trained in helping guide individuals in their planning and projecting your income and expenses.

For example, many women start their own businesses. What do you do with the profits besides pay taxes? You may have an opportunity to fund a sole proprietor 401(k) plan, which offers tax-saving opportunities and a retirement savings vehicle for you. It is easier to do than you might realize. You can also use a Traditional IRA if you meet the income t allow you to save as much as the 401(k) if you have higher income.

Not self-employed? Understanding the benefits and availability of the various retirement saving vehicles could make a big difference in your financial strategies and decisions. Afraid to save because you may need the money? Consider using a ROTH IRA. A ROTH IRA doesn’t give you an income tax deduction today but allows you to save for tax free earnings on qualified distributions. If you need to tap the account, you can always take out your original contributions. Different rules apply to converted ROTH accounts, so make sure you understand the difference. Ask your employer if they offer a ROTH 401(k) option. That may be a better option for younger earners who have not yet reached their full earnings potential. Take advantage of funding a ROTH without the tax benefit while you are in a low tax bracket in hopes that you build up the account for the day you are in a high tax bracket. Waiting until after age 59 1/2, you can take the earnings out without paying tax. Also, there is no required minimum distribution on ROTH IRAs. If your beneficiaries inherit the account, the same income tax benefits will apply to them though they will have to take out Required Minimum Distributions.

t need to tap your retirement accounts and are in a low tax bracket, you can consider converting some of your IRA or IRA Rollover account to a ROTH account. You pay taxes when you convert and implement this strategy if you think you will be in a lower tax bracket when you pay the tax on conversion than when you would later be required to take distributions from a regular IRA account.

With so many scenarios, options and needs for retirement, consider using a professional to help. Start taking care of yourself today and that includes taking care of your retirement.

Email me at lsiebert@valleynationalgroup.com or at www.yourfinancialchoices.com for more information or additional questions.

Remember: Be proactive, not reactive, and make the best of your financial choices.