RETIREMENT STRATEGIES Reaching Your Retirement Goals
Like many people today, you re trying to save and invest for retirement. Building wealth and managing the assets you ve accumulated are important, but there are other factors to consider. These ideas can help you focus your efforts and stay on track. Investment Products: ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY MAY LOSE VALUE ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE
REACHING YOUR RETIREMENT GOALS 1. ESTIMATE HOW MUCH YOU LL NEED The transition from a steady paycheck to drawing income from your investments can be an adjustment, so it s a good idea to calculate in advance how much you ll need once you retire. 2. IDENTIFY ALL SOURCES OF INCOME You may have several retirement accounts, such as an IRA, 401(k) plan, annuity, or company pension/cash balance plan. Keeping track of these assets can help you develop an effective strategy: Which accounts are guaranteed? How much can you expect from each? When can you begin receiving benefits? Where does Social Security fit in? If you don t have the answers, your financial professional can help. 3. USE YOUR SOCIAL SECURITY STATEMENT All workers over the age of 25 now receive an annual statement from the Social Security Administration describing the benefits they can expect when they retire. How will you bridge the gap between what you ll get and what you ll need? 4. IDENTIFY OBSTACLES Saving for a home, college tuition, or a cushion for family emergencies can influence how much you invest for your retirement. In some cases, your IRA may provide a solution. IRAs offer more flexibility than in the past in some circumstances, you can draw income before age 59 1 2 without a 10% federal income tax penalty. Talk to your financial professional to find out which circumstances may apply to your particular situation.
5. CONSIDER A ROTH IRA Roth IRAs can provide tax-free earnings in retirement. Opening a Roth IRA or converting to a Roth IRA may be a good idea if you are no longer eligible for a traditional IRA deduction, if you think you may be in a higher tax bracket when you retire, or if you won t need income from your IRA in retirement. 6. CONSOLIDATE ACCOUNTS Do you know where all your assets are? Besides making it easier to track your investments, consolidating your tax-deferred accounts can help ensure that you maintain an effective asset allocation strategy to meet your goals and manage risk. 7. KNOW YOUR DISTRIBUTION OPTIONS If you re changing jobs or about to retire, you face a big decision about your retirement plan distribution. There are many options available; making the wrong decision could result in unnecessary taxes and penalties. The option that s right for you will depend on your personal situation. 8. INCORPORATE GROWTH POTENTIAL Your retirement can last 20 years or more. Over time, inflation can erode the purchasing power of your savings and investments an annual rate of 4% can cut your purchasing power in half in 17 years. Make sure you have enough growth potential in your portfolio to outpace inflation and meet your future needs.
9. DEVELOP AN ESTATE PLAN Estate planning is another good reason to keep track of your assets. You ll be in a better position to decide what you d like to leave behind once you have a clear picture of what you own. Work with a financial professional to help ensure that your current investment strategies are in line with your estate planning goals. While you re at it, make sure your beneficiary information is up-to-date. 10. CONSIDER YOUR MEDICAL NEEDS Your current medical plan may not be available to you in retirement. Some employers extend medical benefits into retirement, but many do not. You may qualify for Medicare benefits at the age of 65, but will that be enough? What if you retire early? Make sure you know the answer before you retire. If you need to purchase additional health insurance, be sure to factor this expense into your financial plan. 11. UNDERSTAND THE IMPACT OF TAXES ON YOUR RETIREMENT INCOME* The size of your tax bill in retirement could depend on the source of your income. Withdrawals from taxdeferred plans and accounts are taxed at ordinary income tax rates, which could reach as high as 35%. Withdrawals from other sources could be taxed at lower long-term capital gains rates of 15% or less. Knowing how your investments will be taxed in retirement can help you implement tax-efficient strategies now. (And don t forget that in retirement, you ll be paying yourself, and may need to make quarterly estimated tax payments.) *Financial professionals are not tax advisers. Please consult a tax adviser regarding your particular situation.
THE IMPORTANCE OF PROFESSIONAL GUIDANCE Smart investing begins with a plan one that reflects your unique needs and goals, the time you have to achieve them, and your attitude toward risk. As you create your investment plan, the knowledge and experience of a financial professional can be a valuable advantage. He or she can help you strike a realistic balance between your desire to obtain a particular return from an investment and your tolerance for risk. A financial professional will use a variety of sophisticated financial tools and will ask the right questions to find out what s really important to you. Once your program is in place, a financial professional can help you monitor your investment, make sure your asset allocation remains targeted to your goals, and adjust your plan to meet your changing needs.
Financial professionals are not tax or legal advisers. Please consult your tax or legal adviser regarding your particular situation. Strategic Partners products are distributed by Prudential Investment Management Services LLC (PIMS), Three Gateway Center, 14th Floor, Newark, NJ 07102-4077, and offered through other broker-dealers. PIMS is a Prudential Financial company and member SIPC. Strategic Partners is a service mark of The Prudential Insurance Company of America. IFS-A060010 P2198 Ed. 06/01/2004