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Take This Retirement Planning Quiz |
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by Reprinted with permission of Investment Representative Celine Richardson of EdwardJones
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Friday, 28 September 2007 |
 Your school days may be behind
you, but that doesn't mean you shouldn't test yourself on various
subjects from time to time. And one of the most important topics
you can study is Retirement Planning. So, take a couple of minutes
to take this "quiz." The answers - and even the questions - may
prove valuable to you as you save and invest for retirement.
Have you put a "price tag"
on your retirement lifestyle?
All of us have different ideas of the "ideal" retirement. Your brother
may plan to travel the world, your sister may want to open her own
small business and you may choose to volunteer. Once you know how
you want to spend your retirement years, you can calculate about
how much your retirement will cost. A financial advisor can help
you arrive at a good estimate of how much you'll need to spend per
year.
Do you contribute to your 401(k)
or other employer-sponsored retirement plan?
If you have a 401(k) or similar plan where you work, you'll receive
several key benefits by contributing. First, your money has the
potential to grow on a tax-deferred basis, which means it can potentially
grow faster than if it were placed in an investment on which you
paid taxes every year. Second, you typically invest pre-tax dollars,
which means your contributions can actually help lower your annual
taxable income. And third, you can spread your dollars among a range
of various investment choices.
Do you boost your 401(k) contributions
every time your salary increases?
If you don't, you should. Your annual 401(k) contribution limits
are pretty high: $15,500 in 2007, or $20,500 if you're 50 or older.
Obviously, the more you contribute, the greater your chances of
achieving your retirement savings goals.
Do you also contribute to an
IRA?
Even if you contribute to a 401(k), you can put money in an IRA.
A traditional IRA has the potential to grows tax-deferred, while
a Roth IRA offers tax-free earnings potential, provided you've had
your account at least five years and you don't start taking withdrawals
until you're 59-1/2. (Income limits apply to the Roth IRA, however.)
In 2007, you can put in $4,000 to an IRA, or $5,000 if you're 50
or older. And you can fund your IRA with a variety of different
investments.
If you're self-employed, have
you set up a retirement plan?
If you work for yourself, or run your own small business, you'll
need to set up a retirement plan. Fortunately, you've got many attractive
options, all of which offer tax deferral and a range of investment
choices. Depending on your situation, you can establish an "owner-only"
401(k), a SEP-IRA, a SIMPLE IRA or a Keogh plan. Your tax advisor
can help you select the plan that's right for you.
Have you explored other retirement
savings vehicles?
If you've "maxed out" on your IRA and your 401(k) or self-employed
plan, and you can still afford to put away more for retirement,
you'll want to explore other investments, such as annuities, which
offer tax-deferred growth potential and have very high contribution
limits.
There's no passing or failing grade
to this quiz - but if you've answered "yes" to all the questions,
then you're probably putting yourself in a good position to ultimately
work towards your retirement goals.
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