Retirement should be a very special time of life. Attention turns from managing a career or a business to structuring a purposeful life without the cares and concerns of daily demands. Family, often an extended one, comes into sharper focus. Financially, this period often represents an inflection point; that is, the emphasis shifts from accumulating wealth to preserving and eventually distributing it. At this stage of life, the question many people have is: will it last?
Beginning in 2011, the first of the Baby Boomers will turn 65. Over the next 19 years, another 76 million individuals will join them in retirement. Today, senior Americans are living longer and the cost of health care is rising dramatically. Meanwhile, company pension plans are woefully underfunded. Many state and local government pension programs are absolute disasters. Beginning in 2010, the federal government began to pay out more in Social Security benefits than they were taking in. In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers. In 2010, each retiree’s Social Security benefit is paid for by approximately 3.3 U.S. workers. By 2025, it is projected that there will be approximately two U.S. workers for each retiree.
Thus, to prevent the American dream from turning into the American nightmare, very insightful and thorough planning is needed. Often, at retirement, a corporate employee benefit plan will need to be converted into an Individual Retirement Account (IRA). Opening an IRA account is relatively straightforward. It is a matter of completing a few forms and transferring the assets. There are two types of IRA’s: a traditional and a Roth IRA. Each has different characteristics and tax ramifications. Increasingly, IRA accounts are becoming one of the largest components of our estates. Integrating retirement planning with estate planning can be complicated and requires knowledgeable consideration.
Retirement can be a very special time of life and is potentially a very gratifying one. Improper planning, however, can result in catastrophic erosion of your assets. The Trust and Investment Services Group can assist you in Creating a Better Way of Life.