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Destination retirement – Create a preflight itinerary

As you get closer to retirement, you might start to imagine a different life for yourself in the future. Do you want to continue working — part time or perhaps as a consultant? Do more volunteer work in your community? Travel the world? The possibilities for your retirement journey are as unique as you are. As you prepare for takeoff into your retirement, creating an action plan that includes your Individual Retirement Accounts (IRAs) and other resources can help give you confidence that you're on the right road toward retirement. Think of it as a preflight itinerary for your retirement journey. Your IRA can complement other sources of retirement income, such as Social Security, pensions, and annuities. As part of your overall plan, an IRA can also help provide the flexibility to pay for both essential and discretionary expenses.

Prepare for your next phase

It's a good idea to make a few basic decisions about how you'll manage your finances before you actually embark on your retirement journey.

  • Build additional retirement assets by taking advantage of “catch-up” contributions. You are eligible to make additional or “catch-up” contributions if you turn 50 or older within a particular calendar year. A catch-up contribution is an elective deferral to a qualified employer sponsored retirement plan (QRP), such as a 401(k), 403(b), or governmental 457(b), that is made by a participant age 50 or older that exceeds a statutory limit, a plan-imposed limit, or the actual deferral percentage test limit for highly compensated employees. You can contribute an additional $1,000 to your IRA.
  • Know your options for your retirement accounts. Do you have Qualified Retirement Plans (QRPs) left at former employers or IRAs at various financial institutions that you have set up over the years? Your 50s are a great time to learn what the options are for your retirement assets and get a clear picture of what you have and what your retirement income sources will be.
  • Plan your retirement account distributions. At 59 1/2 you can begin taking distributions without the 10% additional tax for early or pre-59 1/2 distributions from QRPs and IRAs. Once you reach your required beginning date (RBD), generally April 1 following the year you turn 72, required minimum distributions or RMDs begin from Traditional, SEP and SIMPLE IRAs, as well as from any QRP left at a former employer. The rules are complex, and the 50% excise tax for every dollar under-distributed can be significant, so it's a good idea to discuss this with a retirement professional.
  • Decide when to take Social Security. You should start thinking about when to receive Social Security benefits at least 10 years before you are eligible to do so. Having a good idea of what your total resources are, including any IRAs, will enable you to gauge how long you can wait to begin taking distributions. Waiting even a couple of years after your initial eligibility can help maximize your distributions over the long term.
  • Plan for health care costs. One important aspect of planning in your preretirement years is taking stock of your health care needs. With retirees spending 20 years or more in retirement, health issues and how to pay for them have become more important. Set up a time to talk with a retirement professional about what you anticipate your health care needs will be, how to cover Medicare shortfalls, and how you will cover potential needs for long-term care. 

Get started

Learn more about how an IRA can help you save for retirement by visiting our IRA Center.

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