There was a poll conducted last year by the Associated Press in conjunction with LifeGoesStrong.com that asked baby boomers questions about how prepared they were for retirement. Approximately one-fourth of the people who responded had no retirement savings at all. The mean amount that these individuals had saved was just $40,000. That is a shocking number.
Clearly, saving for your retirement years is important if you want to be able to do all those things that you have always dreamed of doing. A lot of people will go about this by contributing resources into an individual retirement account, and there are two types of these accounts that are most commonly utilized.
One of them is the traditional IRA. With these accounts, you deposit earnings before they are taxed. The funds you contribute increase in value on a tax-deferred basis. There are no current taxes due each year. When you reach the age of 59 1/2 you can start making withdrawals. At that point 100% of these withdrawals are subject to income tax. Minimum Required Distributions, or withdrawals, start no later than April 15 of the year following the year you reach 70 1/2.
The other most commonly used type of individual retirement account is the Roth IRA. These accounts work in the reverse way. You deposit after-tax earnings, but you are not taxed when you start to make withdrawals. As with a traditional individual retirement account you can begin to tap into the savings when you become 59 1/2 years of age. With the Roth there is no mandatory withdrawal age.
Careful planning is the key to a comfortable retirement. If you would like to devise an intelligent long-term financial plan, the best way to go about it would be to sit down and discuss possible strategies with a licensed and experienced Oklahoma City retirement planning lawyer.
Author, President and Founding Attorney
Parman & Easterday