People in California are forced with a lot of tough choices as they decide how to save their money. Obviously, people want to protect as much of their money from unnecessary taxation as possible, but because every person’s situation is different, there is no such thing as a one-size-fits-all estate plan. When it comes to retirement, the next generation of retirees has some scary realities to face, but with the right estate planning strategies, they may just be able to create a healthier financial situation than they thought possible.
Many people decide to start saving for retirement early in life, but, over time, people’s priorities change. Some people, apparently the majority of so-called Generation X, don’t start saving until too late or don’t save enough to live comfortably once their work income stops. According to a recent study, Gen X and late baby boomers, on average, save an amount that falls well short of the amount of money that they will need to retire comfortably.
A recent article blamed the shift away from defined-benefit pension plans towards 401(k) plans and other individual retirement accounts for the lack of ample retirement savings in these generations. However, people who take the time to understand how traditional IRAs and Roth IRAs can work for them might see this shift as an opportunity for even greater wealth accumulation.
People who have a healthy retirement savings built up in a traditional IRA may want to consider rolling part or all of it into a Roth IRA. Unlike traditional IRAs, Roth IRAs don’t require the holder to start taking mandatory withdrawals at age 70, thus leaving that pre-taxed money available to pass on to future heirs, if desired. Of course nobody’s future is certain, but by discussing your financial goals and needs regularly, people can be prepared for whatever life throws at them.
Source: Forbes, “Why Gen X And Late Boomers Aren’t On Track For Retirement,” Laura Shin, May 28, 2013