Question

Assume your savings will not be sufficient to cover your living expenses. In at least 100 words, what steps can you take now and/or in retirement to live comfortably in retirement?

Answer 1

Answer-

As the savings will not be sufficient to cover living expenses one should consider the investments that will help to grow the savings and help us in leading a comfortable life post retirement.

Some of the Savings plans are

1) Defined Contribution plan - A defined contribution plan is a retirement plan in which the employer and employee or both make contributions on a regular basis to an account.

Some of them are

a) 401(k) plans- A 401(k) plan is a defined contribution tax-advantaged plan that offers way to save for retirement.

b) 403(b) plans- This is offered by public schools, charities among others.and the employee contributes pre-tax money to the plan and are not considered taxable income, and grow tax-free till retirement.

c) 457(b) plans- This plan is applicable only for employees of state and local governments and some tax-exempt organizations. This tax-advantaged plan, allows an employee to contribute with pre-tax wages and the income is not taxed.

2) IRA Plans

Traditional IRA - A traditional IRA is a tax-advantaged plan that allows an individual significant tax breaks that can be saved for retirement.

Roth IRA- A Roth IRA offers substantial tax benefits and contributions to a Roth IRA are made with after-tax money, which means that one had paid taxes on money that goes into the account.

Spousal IRA - This are normally reserved for workers who have earned income, but it allows the spouse of a worker with earned income to combinedly fund an IRA as well.

Rollover IRA - A rollover IRA is created when one moves a retirement account such as a 401(k) or IRA to a new IRA account.

SEP IRA - The SEP IRA is like a traditional IRA, but it is for small business owners and their employees.

3) Pensions

Pensions are Defined benefit plans that are fully funded by employers and provide a fixed monthly benefit to workers post retirement.

4) Gauranteed Income annuities (GIAs) - GIAs are not offered by employers, but individuals can buy these annuities to create their own pensions post retirement.

5) Post sharing plans- Some organizations offer a profit-sharing plan to their workers as an incentive to be productive so that they can both help boost and share in the company’s profits.

6) Federal Government plan

The employee has to meet three requirements
A basic defined benefit plan
Social Security and
The Thrift Savings Plan, or TSP