If you’ve been working over the last couple of decades, you’ve likely seen a lot of changes when it comes to retirement planning options.
Our parents and grandparents often had pensions that would see them through retirement. As those began to phase out, 401(k)s started to phase in. Now, we have even more options when it comes to retirement planning.
The important thing is to figure out which one is right for you.
Throughout the years, the 401(k), 403(b) and 457 payroll deduction plans have offered the simplest method of saving for retirement, while also decreasing your taxable income. However, in recent years the Roth option has also become very popular as a payroll deduction option that is post-tax yet grows tax free.
When I sit down with a client, we discuss the pros and cons of pre-tax and post-tax investments. Although you always want to take advantage of any employer match, there are many occasions when clients will choose the post-tax (Roth) deferral instead of the pre-tax option.
Contract Workers/Business Owners
If you’re a business owner, independent contractor, or self-employed, you might be overlooking your retirement savings options, such as:
Selecting the appropriate plan as a self-employed worker often requires comprehensive fact finding in order to choose the most beneficial option. Unfortunately, as a business owner, you might be shortchanging yourself by overlooking some options that are available to you. Now is the perfect time to take a look at that so you don’t find yourself coming up short during your retirement years.
A Few Options
The Roth 401(k) has become a very popular option in the past few years. The investment is made using post-tax dollars, while the investment grows tax free.
It is important for you to think through the pros and cons of pretax versus post tax. Would you rather decrease your taxable income now or pay taxes currently and benefit from tax free income when you retire? This is just one of the questions we’ll talk about when we discuss your options.
Traditional or Roth IRA
For the many people who don’t have an employer sponsored retirement plan, consider opening your own Traditional IRA or Roth IRA. These accounts give you the opportunity to save towards your retirement and decrease your taxable income. Please note: You must have earned income in order to qualify and there are income limits to consider.
There is also the option of opening a non-retirement type account. This is often called a brokerage account or TOD (Transfer on Death) account. You invest in this account utilizing post-tax dollars and the capital gains and dividends are reportable on your tax return each year.
This is an option available to anyone who is interested in simply setting aside a bucket of money for your future, with more flexibility than retirement plans provide.
How We Can Help
Is your head spinning? I know it’s sometimes hard to understand all of the options available to you, but that’s what we’re here to help with. The main goal of this blog is to make sure you know you DO have options.
Remember that each day you start saving for your retirement allows you to keep growing your assets. We’re here to help you look at your future goals and current lifestyle and make decisions that are right for you and your family.
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Debbie Charpentier has been serving clients since 1989 by using a holistic, comprehensive approach that helps clients create the life they value and the legacy they envision. Charpentier Wealth Strategies is a Bakersfield, CA Financial Planning practice that offers fee-based financial planning services. To contact Debbie, email Debbie.Charpentier@LFG.com. http://charpentierwealth.com/ Debbie Charpentier is a registered representative offering securities and investment advisory services through Lincoln Financial Advisors Corp., (Member SIPC). Charpentier Wealth Strategies is a marketing name for registered representatives of Lincoln Financial Advisors. CRN-3759083-091321