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Home › Articles › Retirement › Preparing for the Golden Years

Preparing for the Golden Years

Financial Planning for Retirement

By Megan L. Fowler

Pages:  1  2  3  4  

  • Using an anticipated compounded inflation rate, calculate how much the "what number" will be when you reach age 65. (Yes, this is tricky, so it's best to have a professional do this for you.) Note: If you were born in 1960 or later you are probably going to start getting Social Security checks at age 67. Therefore, you might be retiring at 67 instead of at 65.
    • Including Your Kids

    "Mom and Dad can start a savings account for Junior, but they can't start a retirement plan for him," Webb says. "Most teenagers won't have access to retirement plans through their work, but they can contribute up to $3,000 to an IRA once they start earning income."

    Saving for college, however, might be a more important goal to have first, depending on the circumstances. "If a high-income mom and dad plan to pay for college anyway, the family may agree that Junior should put money into an IRA," she says.

    "A traditional IRA will save Junior taxes," Webb says. "But a Roth IRA should provide for spectacular long-term growth of the savings that will remain tax-free even when withdrawn after age 59. Consider this, too: Junior must have earned income to contribute to his IRA, but it doesn't have to come from his own money. Say Junior gets a job earning $4,000 during the year while in high school. He is on a budget to buy his own clothes, pay for movie tickets, gas, etc., and he really doesn't earn enough to save much of anything. But Mom and Dad (or Grandma and Granddad) can gift him $3,000 to contribute to his IRA. Junior can learn the value of a dollar and get a marvelous jump-start on saving for retirement. What a great thing to do for your child."

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