Tuesday, October 27, 2009

3 Tips for a More Secure Retirement

Planning for retirement is no simple or streamlined task. However, one of my favorite bloggers, The Motley Fool, posted 3 great trips this morning to help anyone with their retirement planning. You can check out a segment of his article below, or click here to read the full version

Successfully planning for your retirement takes a lifetime of hard work and dedication. After going to all that trouble to provide for your golden years, the last thing you want is to blow it by making mistakes when the time comes to start spending down your retirement savings.

IRAs, 401(k) plans, and other methods of saving for retirement give you valuable tools that you can use to boost the value of your portfolio. When you start taking money out of these accounts, though, you need to remember that there's more involved than just asking for a check. Smart planning can make a huge difference in how much of your hard-earned money you actually get to keep.

How the IRS gets its due

Some of the best features of retirement accounts are their tax benefits. Traditional IRAs and 401(k) plans, for instance, give you a current tax deduction that can save you thousands in income taxes year after year.

After you retire, though, it's payback time for the IRS. Every time you take money out of a traditional IRA or 401(k), you create taxable income that will usually increase your tax bill. In addition, if you decide to retire before you turn 59 1/2, then an additional 10% penalty may apply if the withdrawal doesn't qualify for one of many exceptions to the penalty rules.

Given this, many investors choose to go with Roth IRAs if they can. But even with Roths, you'll want to be careful: Once you take money out of the Roth, it no longer generates tax-free income for you.

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