Question

1. What are some of the personal and financial difficulties you might face if you don’t plan for retirement?
2. According to an article in the April 11, 1998 issue of The Economist, several countries are considering the possibility of requiring retirement savings. Should governments require citizens to save, and if so, how much should governments force people to put aside?
3. Which is better for you personally, a standard IRA or a Roth IRA, and why?

Answer 1

1. If a person do not plan for retirement then he might face personal and financial difficulities which are as follows:-

* The one of the biggest difficulty one might face is to keep working in the retirement period to cope up with expenses in the time when they are not able to work more.

*Those who have not planned and saved for retirement can be drawn in debt instead of planning for the future.

*The personal difficulty that can arise of non-planning for retirement is that one may leave their family with financial and emotional stress.

*If a person have not planned and saved for future then he/she might be dependant on his/her children to support them financially.

2. The governments should require the citizens to save to contribute to retirement accounts. The government would have to decide how much people have to keep aside as savings and how the people should invest. Instead of government turns into large asset manager in the financial market which can create uncountable number of conflicts they can rely on private asset managers to avoid these conflicts. In this case, people can pick their asset manager who can advise them about the investment options available and amount which they need to save and invest according to each person ability to save and spend. The government can frame various rules and policies to regulate the workings of these private asset managers in order to avoid any frauds and risks.

3. In standard IRA,one can deduct contributions now and pay taxes on withdrawals later and in Roth IRA, one can pay taxes on contributions now and get tax-free withdrawals later. To choose the better IRA, one of most important key factor is to determine whether your annual income will be higher or lower in retirement.