Retirement Plan

Retirement Plan: Best Practices

You don’t need to accumulate a massive amount of wealth to live well during retirement. You don’t need an amount equal to your pre-retirement income to live on either. Most people retire on significantly less and live well. These are a few practices that might put you well ahead when the time comes that you want to pull the plug on work.

Debt management

You’re fighting against yourself if you continue to accrue debt while adding to your retirement savings. They’re mutually exclusive. You can’t maintain that debt. Paying down debt is tantamount to a zero risk return. As opposed to investing, you’re better off paying down debt. Have a defined strategy to pay down or extinguish debt.

Protect the retirement investment

One contingency that impedes investors’ retirement is the significant unforeseen expense. This can come in the form of a job loss or medical expenses. While investing and accumulating a retirement portfolio, it’s recommended that you also set aside sums to live on for up to a year should the worst occur. Digging into retirement money for ordinary living expenses is avoided. Something unforeseen happens to most of us.

The 401(k) and IRA

401(k) contributions provide immediate tax deferred savings. Many employers will match what you contribute. That’s a great tax deferred retirement strategy. An IRA also offers significant tax benefits. The traditional IRA offers tax deferred growth, while a Roth IRA permits tax free growth on after tax money invested. With the 401(k) you pay tax on withdrawals. You pay no tax on Roth withdrawals.

About that house

When the kids are gone, your suburban home can be far too big. There might be rooms that you don’t go into for months. Many people no longer wish to keep and maintain that large suburban home when the light at the end of the retirement tunnel gets brighter. You can buy an equally comfortable place in an equally comfortable neighborhood with a lower price, lower taxes and considerably less maintenance. Take the profit from the sale of your old house, and use it any way you wish. You earned it. Don’t let your house become a money pit.

It’s never too late to start, but the sooner you start, the better funded your retirement will be. Enjoy a long retirement.

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Jonah Engler

Former Stock Broker and Financial Expert, Jonah Engler is a New York City based entrepreneur who writes about entrepreneurship, investing, public relations, and other topics that fascinate him. Engler explores Entrepreneurship through his Mobile Phone Franchises in the NYC area.