Ivan Solis
Ivan Solis
Ivan Solis
,
Ivan Solis
Retirement Planning

Retirement Planning

Retirement!  That blessed time when you can end the working stage of your life and begin a life of leisure, spending time with loved ones, working on hobbies, and relaxing.  Sounds amazing, but how do you make sure you have enough money saved to continue to live your life without pulling a paycheck?  The average age for retirement is 66, while the average life expectancy is around 86, leaving 20 years or more of retirement funds you need to have available.  Some taxpayers believe that Social Security will hold them over; however around 65% of individuals who reach age 65 will need long-term care at some point in retirement.  Social Security funds may not be able to provide the amount of support or cashflow many taxpayers were expecting, considering that Social Security funds are declining, and may lead to lower benefits in the future.  So, how do you plan ahead to ensure you will have the necessary funds to carry you through the rest of your life?  Here are some tips to get you started.

First, you need to consider what kind of standard of living and spending you’d like to have available during retirement. Next, determine what your options are and what type of retirement accounts work for you.  There are many tax advantaged retirement accounts available to taxpayers such as:  401(k)’s, Simple IRA’s, SEP IRA’s, and Traditional and Roth IRA’s.  You may be eligible to have both and employer provided and an individual retirement account combination.  For example, you may have the option to contribute to a 401(k) retirement plan provided by an employer and a Roth Individual Retirement Account (IRA).  Depending on your income limitations, age, and other eligibility factors, a taxpayer may be able to contribute a pre-tax amount (not subjected to Federal Income tax) of up to $19,500 into your 401(k), and $6,000 post-tax (already taxed) money into a Roth IRA yearly.  Many employers offer Roth 401(k) plans to their employees, which allow certain benefits from a Traditional 401(k) and a Roth IRA combined.  Roth 401(k) plans allow up to $19,500 of post-tax money as contributions.  Earnings and distributions will be tax free at the eligible withdrawal retirement age, 59.9 years-old.

Tax savings generated from these types of tax advantaged investment accounts benefit many taxpayers and are provided to incentivize taxpayers to save for retirement.  For example, Traditional and Roth IRA contributions for a certain year are allowed for up to 18 months, meaning a taxpayer may still make 2020 contributions towards an IRA in 2021.  Additionally, the power of compounded interest is real:  an initial contribution of $1,000, with $10,000 contributions annually over 45 years, would accumulate a portfolio amount of more than $4.2 million assuming an 8% annual return.  Even if the annual return rates are lower than expected, say 4% instead of 8%, the total portfolio amount about would be $2.1 million.

The complexities of eligibility, contribution, distributions, and tax savings that can be generated through various scenarios can be overwhelming for many people, especially during retirement years.  Our team of professionals at ADKF have extensive experience working with businesses across a wide array of industries and have access to financial resources and publications that we use to assess a client’s financial position overall to provide personal tax financial planning, or to suggest tax savings generated from the various retirement accounts offered.  Please do not hesitate to reach out to us for assistance or tax planning on any matter.  We are with you all the way!


ADKF
is the largest, locally owned public accounting firm in San Antonio, Texas, with branch offices in Boerne and New Braunfels. We have been serving our community since 1991. We are a full-service CPA firm dedicated to providing a broad range of tax, audit, bookkeeping, tax controversy, and consulting services with superior customer service to help our clients meet their goals and objectives. Please click here to set an appointment with us.

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