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How Retirement Might Look Without a Savings Plan

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It's National Retirement Security Week 2018 and we're doing our part in raising awareness about the importance of your current, or future retirement plan. It's the perfect time to check your plan to see if your goals are being met, and if you're on track. Think about it: what would happen if you attempted to retire without a savings net? The reality is - you would continue to need a paycheck. The end result of not being prepared can be devastating. 

 

The Reality 

Social Security payments will cover only a small percentage of your living expenses and Medicaid will not cover all of your medical care. You’ll also have to consider additional expenses that may come up, such as continuing mortgage payments, unexpected life events, your child’s marriage and your grandchildren’s education. Someone who makes between $50,000 and $80,000 at the year of retirement will need to make about 88 percent of their salary in retirement, and a larger percentage of that amount goes to medical care. An average cost of living in retirement in America is about $40,000 to $45,000, yearly.

A Growing Concern

It becomes clear that without a retirement savings plan, your later years may be filled with worry and doubt. Retirement is an increasing concern among older Americans. According to a study by Bankers Life Center for a Secure Retirement, 62 percent of middle-income Baby Boomers express doubt that they will have enough money to live comfortably throughout retirement. More than 80 percent of them say they have not received any training or education on retirement security. One in three has less than $25,000 saved for retirement.

That’s why it is important to save now. An individual retirement arrangement (IRA) allows individuals to save on a tax-deferred basis, and in the case of a Roth IRA, completely tax-free. Even if you don’t think you have savings with which to start an account, there’s a strong likelihood you do. Many employers offer 401(k) retirement plans to employees; some even offer an employer-match program. Once employees leave their employer, those accounts can be rolled over to an IRA instead of sitting dormant. Rolling assets from a 401(k) to an IRA is as easy as filling out two forms; one each from the 401(k) administrator and the IRA administrator.

The IRS motivates Americans to save for the future by allowing most IRA contributions to be deducted when filing annual taxes. The earnings in these accounts will appreciate on a tax-deferred basis. Roth IRA contributions are not tax-deductible, but the earnings within them grow tax-free. To see if you qualify for deductible contributions, view our Contribution Limits for IRAs and Other Tax-Advantaged Plans.

Plenty of Options and Saftey Nets

Entrust offers several retirement plans. Besides Traditional and Roth IRAs for individuals, there are SEP IRAs for the self-employed or those who are partners or owners of a corporation. SEP plans allow the owner to make contributions for themselves and their employees. A SIMPLE IRA gives employers of companies with 100 or fewer employees an easy way to make contributions toward their own retirement, as well as toward the retirement of employees. And an Individual 401(k) is designed for businesses that employ only the owner, her spouse, and partners.

Use Your Resources

Educating yourself about planning for your later years is easier than you may think. Entrust offers many resources to help you prepare for retirement, such as guides, reports and white papers, as well as live and on-demand webinars. All of these are available for no charge. Additionally, you can take advantage of the IRS’ retirement planning calculators, or other third-party savings tools.

Most retirement accounts allow owners to invest in traditional assets such as stocks and bonds. But if you are knowledgeable about a particular industry, such as real estate, precious metals, energy assets or LLCs, administrators like The Entrust Group offer individuals the opportunity to invest in these nontraditional assets through their retirement plans.

There are many options available for every type of individual. It’s not too late to start saving for the future. If you haven’t yet begun planning for your retirement, now is a great time to start. It's time to take action.

To discuss your options, contact one of our local offices or sign up for a free consultation.

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