As the baby boom generation enters into retirement, retirement planning is suddenly a major topic of discussion among those at or nearing retirement and even those who are many years away from retirement.
Retirement planning poses different challenges to each of these groups. For baby boomers, a great deal of them will have already reached retirement age and will be living in retirement during the next ten years. Hence, there is very little retirement planning that can be done. Although this might sound too pessimistic but it is not really the case because Social security is still available and according to different studies, more than 75% of baby boomers are planning to work past age 60.
Although those two points might be considered positives for those who are about to retire, the reality is that more needs to be done for those that are a few years away from retirement because the luxury of social security may not be there a few years from now.
What needs to be done and should you hire a retirement planner?
Whether you hire a retirement planner or not depends on how comfortable are you with terms like IRA, 401k, investing and asset allocation. But regardless if you hire a retirement planner or not, most retirement planners agree that you should be taking the following steps regardless of how old are you:
1- Take advantage of employer retirement plans such as a 401k, or 403b and contribute the most you can. Many employers offer matching contributions and it is just a lost opportunity not to take advantage of these retirement plans.
2- If you have an employer provided 401k plan make sure the funds are invested in a diversified portfolio particularly if you have a large portion of it in company stock.
3- If you don’t have an employer provided retirement plan look into establishing an IRA or a Roth IRA. Saving for retirement in an IRA gives you tremendous tax advantages as your money grows tax deferred in an IRA, while it grows completely tax free in a Roth IRA.
4- Consolidate your plans: Many employees have changed jobs one or more time during their career. Many often leave their 401k at a previous employer and thus after a few jobs end up having several 401k plans at different places. One good move is to consolidate these former 401k plans into one rollover IRA that can be invested with your goals, objectives, and risk tolerance in mind.
5- Before taping an IRA or a 401k or other qualified retirement plan, make sure you seek expert advice regarding your distribution options. 401k Distribution options from retirement plans can be very complex, and making the wrong decision might mean hefty penalties and a large tax bill.
