This article is original content written by Manchester, CT Financial Advisor Thomas Scanlon, CFP®, CPA
Are you planning for your retirement? If so, keep in mind, This is NOT Your Parents Retirement.
Your Parents Retirement
What did your parents have when they retired? The BIG THREE which are:
1) Company Pension
2) Social Security
3) IRA / 401(K) Plan / Personal Savings
This trifecta generally provided for a reasonably comfortable retirement.
Your Retirement Plan
Can you rely on the BIG THREE like your parents did? Perhaps, but not likely. Why is this? Start with the pension plan. These have gone the way of the dinosaur. Most businesses have terminated their pension plan and implemented a 401(k) plan. Federal, State and Municipal employees are one of the few groups left with a pension plan.
While you will be eligible to collect social security for most folks now the full retirement age is a few months over age 66. Due to the significant funding of the social security system there are proposals to increase the full retirement age even higher. This puts even more reliance on your IRA, 401(k) Plan and personal savings.
The 401(k) Plan allows for employees to contribute up to $19,500 in 20205. Employees aged 50 and older can make a so-called ‘catch-up’ contribution of an additional $6,500 for a total of $26,000. The government believed that investors weren’t saving enough for retirement and that is why they instituted this catch-up provision. Taxpayers can contribute up to $6,000 to their IRA and have earned income of at least the $6,000. Higher income tax payers may not be entitled to an income tax deduction. Taxpayers over age 50 can also make a catch-up contribution of $1,000 for a total of $7,000. If you want help with your retirement planning check out 7 Habits of Highly Effective People That Want Retire.
The information contained in this report does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the forgoing material is accurate or complete. Any opinions are those of Thomas F. Scanlon, CPA, CFP and not those necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Tax preparation and accounting services are provided by Borgida & Company, P.C., not as a service of Raymond James. You should discuss your tax or legal matters with the appropriate professional. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.
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