Now is a great time to review your retirement investment strategy.
Choosing the right retirement investment plan for your retirement funds can be very confusing. Among your options are: 401(k)’s, 403(b)’s, Regular IRA’s, Mutual Funds, Personal Annuities, CD’s and Roth IRA’s. Choosing the option, or combination of options that will best meet your retirement goals takes careful thought and planning.
Here are some ideas to consider:
Many retirees express frustration at the unexpected burden of high income taxes in retirement, which usually results from two things. First, most of the income that retirees receive has never been taxed, including income from the Master Retirement Plan and 401(k)’s. In addition, as much as 85% of Social Security is subject to taxation based upon a person’s filing status and income each year. Therefore, most income for retirees is subject to income taxation. Second, tax deductions for most retirees either don’t exist or are very limited.
One way to reduce the tax bite in retirement is to have a portion of your retirement savings invested in a Roth IRA. Following are some of the highlights of a Roth IRA:
- A $5,000 annual contribution limit per person (or $6,000 if you are age 50 or older).
- Earnings grow tax-free (not just deferred) if withdrawn after five years or more and age 59 ½.
- Principal contributions are available for withdrawal anytime – penalty free.
- No mandatory minimum distribution age since your contributions are made with after-tax dollars.
- Up to $10,000 in earnings can be used for purchase of a first home after 5 years.
Participating in a Roth IRA is easy because contributions to the plan can be made directly from your paycheck through payroll deductions. Contributions can be as little as $25 per month.
For BYU personnel, investing in the DMBA Thrift Plan to achieve the maximum employer match should be a first priority in a retirement investment strategy. As additional funds are available, investing in a Roth IRA may be a good next step.
It’s your money – make the most of it.
To sign up for a TIAA-CREF Roth IRA, come to the Benefits Office D-240 ASB or call 2-4716 for more information.