Although you can call quitting work “retirement” at any time, having enough money to sustain your post-work life takes careful planning. In addition to the fundamental financial planning principles such as “pay yourself first” and “save as much as you can,” retirees must be conversant with more specialized phrases and concepts.
Here are some key retirement terms to understand before and after your retirement to ensure you’re on the right track.
1. Required Minimum Distribution (RMD)
When account holders reach a particular age, say 72, they must begin drawing annual distributions from pre-tax retirement accounts such as IRAs or 401(k) plans to enable the IRS to collect taxes on them.
2. Full Retirement Age (FRA)
The age at which you are eligible for your basic Social Security benefit is the full retirement age (FRA). The FRA is 67 for anyone born after 1960. While you can start receiving benefits as early as age 62, your monthly payout will be cut by up to 30%. However, if you delay until you’re 70, your benefits will increase by 8% per year until then.
3. Matching Contributions
Many large companies will match at least a percentage of your 401(k) plan contributions. Your company, for example, can match 100% of the first 5% of your earnings that you put into your account. This can effectively increase the amount you put into your 401(k) each year at no further expense to you.
4. Individual Retirement Account (IRA)
Many employees lack access to a company-sponsored retirement plan, such as a 401(k). Workers may be able to contribute to an individual retirement account (IRA) in this situation. Contributions may be tax-deductible, and money in the account grows tax-free until it is withdrawn in retirement.
5. 401(k) Plan
A 401(k) plan is most likely available if you work for a larger company. Like an IRA, a 401(k) plan enables pre-tax contributions and tax-deferred earnings. 401(k) plans, on the other hand, offer far greater contribution limits and, in most cases, allow for employer matching contributions.
6. Saver’s Credit
The saver’s credit allows you to deduct up to 50% of your contributions to retirement plans such as 401(k)s and IRAs, depending on your income. The credit is capped at $68,000 for joint filers and $34,000 for single taxpayers.
7. Compound Interest
When planning for retirement, the compound interest could be the most significant idea. The more time is available for you to save and invest before retirement, the more time your investment has to compound and increase.
8. Estate Planning
As you get closer to retirement age, estate planning becomes increasingly important. Estate planning is the process of arranging your assets to pass to your heirs according to your intentions.
Contact Information:
Email: [email protected]
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Bio:
Mike was born in Chicago, Illinois on August 13, 1946. He was brought up in the
suburb of Skokie on Chicago’s northwest side and graduated from Niles Township (
East ) high school In 1964. Two years later he joined the US Air Force in November of
1966. After 2 years of Intense training he volunteered for Viet Nam and was sent to
Bien Hoa Airbase, which was 25 miles from Saigon, the nation’s capital. He
volunteered for a number of especially dangerous missions on his days off, such as
flying as a door gunner on a US Army helicopter and as a technical assistant on a
psychological operation on an Air Force O-1E observation aircraft. Capping off his
impressive accomplishments was winning the coveted Base Airman of the Month for
March 1969, a feat which was featured in the Pacific Stars And Stripes newspaper
read by every service man stationed in the Pacific theater of operations. After his
Viet Nam tour of duty he was stationed at Luke Air Force Base in Glendale, Arizona
where he met and married his wife, Lequita.
He graduated from Arizona State University in May, 1973, and after a 30-plus year
career as a financial advisor he joined a number of service organizations including
Easter Seals and Valley Forward, sponsor of EarthFest. He was also involved with the
National Federation of Independent Business and became the longest-serving
chairman of the Leadership Committee ever. He spoke before the ( AZ ) House Ways
and Means & Senate Finance committees. He then joined Disabled American
Veterans ( DAV ) in September of 2015. He rose quickly through the ranks and
became Chapter 8 Commander in May of 2019 where he served with Distinction for 3
years before being “ termed out”. The next year, as Vice Commander, he won the
title of National Champion Recruiter!
