by Barbara Nevins Taylor
Many of us live pretty firmly in the now when it comes thinking about finances for the future. Retirement planning often seems like a good idea at a point way down the line. How many times have you told yourself or a friend, “I’m not ready to think about that yet.”
But optimism about the future needs a practical boost from a plan that you make now. And if you hate the word retirement, call it a plan for tomorrow, or a plan for the future. You make up your own labels.
A MetLife Mature Market Institute study found that a 65-year-old man today has a 41% chance of living to 85 and a woman has a 63% chance. With long lives ahead of us, we need to think about how we will support ourselves, protect ourselves and maintain control over our lives and assets.
Remember the saying, “Necessity is the mother of invention?” While no one is sure who said it, maybe Plato, necessity in this case means creating a blueprint for the way that you want to live the important years of your life.
We need to treat the inevitability of getting older the way we’d approach our business or professional lives.
Attorney Stuart Schoenfeld says, “The sooner you start to plan the more choices have. The longer you wait the more likely it is that you lose your independence and control.” You want to put your ideas about your future, and what comes later, on paper.
Here are the first steps to take:
Tip 1 – YOU NEED A WILL. Your will should clearly spell out how you would like to leave your assets to your heirs or others. Planning saves heartache and headaches for you, and eliminates any questions people may have later. It’s a good idea to consult a lawyer. If you can’t afford to do that ask your local bar association for a referral to a lawyer who may do this for free.
Tip 2 – YOU NEED A HEALTH CARE YPROXY. A health care proxy is extremely important. This document legally designates someone to help with doctors and hospitals if you get sick. Experts advisee it, and I know it it’s true because of my personal experiences caring for my mother, my husband’s parents and elderly relatives. If you don’t have a health care proxy, the current laws prevent medical professionals from discussing your case with anyone but you. And that’s okay to a point. But it’s imperative to have an advocate when you deal with doctors especially in an emergency setting. So a health care proxy designates the person you want to help you get the best care possible
Tip 3 – YOU NEED A LIVING WILL. This makes your wishes crystal clear about how you want medical personnel to treat you in extreme situations. You can choose to say that you want to be resuscitated and kept on life support, or say that you do not want extreme measures used to keep you alive. This is all up to you, and your wishes should be recorded in a legal document.
Tip 4 – YOU NEED A POWER OF ATTORNEY This designates someone to handle your personal and business affairs while you’re alive, if you cannot do things yourself. Even if you can do things, it’s always a good idea to have a trusted person assist. It’s smart to get a qualified estate lawyer to help make these plans and put them on paper. If you can’t afford a lawyer, some states and local bar associations offer online forms. But be careful. The American Bar Association, www.aba.org offers a state-by-state list of clinics and not-for-profits that offer affordable and even free legal help.
Tip 5- YOU NEED TO REVIEW YOUR MONEY AND SAVINGS Studies also indicate we don’t start thinking about saving money for retirement early enough. Many wait until their fifties, or later.
And more than 36% of Americans are not saving for retirement according to a recent Capital One Sharebuilder survey. It’s important to calculate what your benefits might be: Even if you are just starting out experts advise that you take advantage of every opportunity to save.
Your company 401 K.
A 401K is set up by your employer. It allows you to invest money regularly. This money is not subject to taxes, if you keep it in the plan until retirement. If you withdraw money before you are 59 ½ there’s a 10% penalty. The downside is that your company decides where the money should be invested.
Creating an IRA.
An IRA (Individual Retirement Account) allows you to put money, before it’s taxed, into an investment plan. You can choose how the money is invested, but if you withdraw it early there is a 10% penalty. You do pay taxes on your profits when you withdraw from an IRA at retirement. And you have to begin withdrawing money when you are 70 ½.
A Roth IRA differs from a traditional IRA in that you pay taxes on the money before you invest in the plan and your contributions are not tax deductible. The upside is that your earnings are tax-free once you start to withdraw money. And the IRS says money from a Roth account does not have to be withdrawn until after the death of the owner.
Socking money away in a savings account is still a solid way to save. But when interest rates are low you won’t make much money by allowing a bank to hold it.
For more on the tax consequences of investing plans visit www.irs.gov
Tip 6 -CONSIDER YOUR SOCIAL SECURITY