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Planning for your retirement—even if it is 10 or 20 years away—has never been more important. That is because half of all Americans under age 65 are now expected to live into their 90s, Social Security is expected to cover less and less of retirees’ income needs, and health care costs continue to rise. Make a plan now—it’s up to you.

By working with your trusted advisors today to organize your financial information, assess your income needs in retirement, and develop a sound retirement income strategy, you will be on a path to working toward maximizing your retirement resources. To plan successfully, you need to know what assets you have and build an investment strategy that could help you meet your financial goals for retirement. Your first step is to develop a budget so you can estimate what your expenses will be in retirement.

Calculate what your expenses are today and what will change when you retire.

  • First, determine your essential needs because these are the most important expenses to cover first.
  • Second, look at the lifestyle changes you will want to make to enjoy retirement.
  • Third, remember your dreams, which may include creating a legacy or fulfilling lifelong desires.
  • PLAN
    Maximize your potential resources by contributing as much as you can to all of the tax-advantaged retirement plans available to you.

  • If you are age 50 or older and have earned income, you can make catch-up contributions to your IRA and 401(k) accounts.
  • If you have a 401(k) account, make sure that you are contributing enough to take advantage of any matching contributions.
  • The Roth 401(k) was introduced in January 2006 and may offer another opportunity for tax-advantaged savings. Check with your company to see if it offers one.
    Consider consolidating your assets to simplify your retirement plan accounts, reduce annual fees, make your bookkeeping easier, and clear the way for better oversight of the required minimum distribution (RMD) process. If you own a 401(k), 403(b), 457, or pension with a former employer, or if you have in-service distributions, you may benefit from consolidating these assets. Work with your financial advisor as to the proper consolidation method, as taking distributions from these accounts prematurely will incur penalties and taxes. The right plan may help you maximize your retirement savings, minimize your taxes, and help make your money last longer in your retirement.

    When should you take it and how much will it be? Many people believe that once they hit age 62, they should immediately begin receiving social security benefits. Others have been advised to wait as long as possible before drawing distributions. This has become an even more difficult situation given the recent turbulent market conditions, which may have damaged other retirement savings. As you may have guessed, there is no one right answer. There is, however, a right answer for you.

    Depending on your health, life expectancy, retirement goals, and sources of income, you may want to receive social security benefits beginning at your early retirement age (62), your full retirement age (between 65 and 67), or even age 70. Because there is no mandatory age to begin taking benefits, determining when to start receiving social security is a critical component of retirement planning. The two most important factors in making this decision are (1) your life expectancy and (2) what you plan to do with your social security income.

    The Social Security Administration website,, is a valuable resource. As you know, many people are working well past the typical retirement age, regardless of their income needs. This may prove an option even if you could readily take your social security benefits early.

    Be sure to consider health care costs. To create a distribution plan that can help you achieve your financial goals, we suggest working with your financial advisor. Planning for the distribution of your retirement assets after your death is an important part of your estate planning. Not only will it help to ensure your inheritance wishes are carried out, but it also can help minimize estate taxes.

    Once you have named both your primary and contingent beneficiaries on all of your accounts, it is important to keep these designations up to date, reviewing annually. Discuss the implications of designations with your estate planning attorney and financial advisor.

    Consider stretching your IRA distributions over several generations with the Stretch IRA strategy. Designed for investors who will not need all the money for their own retirement needs, a Stretch IRA allows your beneficiary to take distributions over his or her life expectancy. This minimizes current income taxes and potentially keeps more assets growing in a tax-deferred account. As the owner of the account, it is important to make sure your heirs understand the principle of the Stretch IRA strategy.

    Because of upcoming changes in the gift and estate tax laws, careful planning is important. The current estate tax exemptions, including the elimination of estate taxes in 2010, have a sunset provision. Unless Congress acts to make the planned exemptions permanent, estate taxes in 2011 will revert to 2001 levels. Regardless of where you are right now, you can create a plan to get you on the road to becoming financially self-sufficient in retirement. Even the most seemingly impossible situations are better addressed with the assistance of a qualified professional.

    Beth Jones, RLP® is a Registered Life Planner and Financial Consultant with Third Eye Associates, Ltd, a Registered Investment Adviser located at 38 Spring Lake Road in Red Hook, NY. She can be reached at 845-752-2216 or Securities offered through Commonwealth Financial Network, Member FINRA/SIPC.

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