Saving for retirement provides peace of mind as you age, giving you the cushion you need to live comfortably later in life. However, the many different retirement plans available can make it difficult to know where to start. Work with your accountant and keep these factors in mind while going over different options.

What Should You Think About Before Retiring?

1. Your Tax Bracket

When choosing which IRA you'd like to use, think about the tax bracket you’ll likely fall into when you retire.

If you expect to be in a lower tax bracket, consider a traditional IRA where you make contributions on a pre-tax basis. This allows you to deduct IRA deposits from your taxable income, so you pay less in yearly income taxes.

If you think you'll be in a higher tax bracket, a Roth IRA might be a better option. With a Roth IRA, contributions are not tax-deductible. Instead, you pre-pay your taxes, so deductions are tax-free when you retire. This is ideal for significant investments with the opportunity for growth, such as stocks and bonds, because they won't be subject to taxation.

2. Your Retirement Age

To benefit the most from your retirement plan, think about when you want to retire.

Accountants note that if you retire at 59 and roll your 401(k) into an IRA, you'll be subject to withdrawal penalties. You won't have to pay the 10% withdrawal fee to remove money from a 401(k), so keep your plans separate if you want to retire early.

3. Your Healthcare Needs

Retiring after 65 makes you eligible for Medicare, though this system doesn't pay for all healthcare costs. Supplemental insurance, or Medigap, covers copayments and other out-of-pocket expenses that Medicare doesn't cover.

If you plan to retire before you turn 65, you won't be eligible for Medicare coverage, and you must account for healthcare costs in your retirement plan.

4. Your Inheritance Plans

Avoid overinvesting in retirement and paying unnecessary taxes with estate planning help from your accountant.

A Roth IRA allows you to leave money to children and grandchildren easily because there are no required minimum distributions, and the balance simply increases.

Also, because Roth IRA money is pre-taxed, your benefactors can withdraw funds without taxation penalties. 

Create the best retirement plan for your needs with Tostrud & Temp, S.C. This company has served the La Crosse, WI, area for over 35 years with a team of experienced accountants who can provide detailed financial analyses, among many other services. Call (608) 784-8060 to start planning for the future, or visit them online for more information about their services.