Tax Law Advisors - Preparing for Retirement {Standard as well as early retirement}

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Social Security was never designed to be an individual's sole source of retirement income. Instead, it was meant to bridge the gap between people's income from pensions and savings and their monthly expenses.

Today, however, nearly two-thirds of all seniors rely on Social Security for at least 50% of their total monthly income. Nor are annual cost-of-living adjustments, or COLAs, keeping up with the spiraling costs of healthcare, housing, and energy in many areas across the country. Adjustments to extend the program's solvency have reduced benefits in real terms, as well as ratcheted up the age at which one can attain full benefits.

What's more, traditional company pension plans are fast going the way of the horse-and-buggy and the dodo bird. Instead, employers are moving toward "defined contribution plans" that put most of the responsibility for planning, funding, investing, and distributing plan funds squarely on the shoulders of individual employees.

Given these trends, one thing is clear: Each person must put increasingly greater emphasis on securing their own financial future in retirement. Your actions today and throughout your working career may make the difference between relying on government programs for a modest monthly income and enjoying a secure, independent "golden years."

The price of procrastination is steep and the cost of inadequate preparation too high for you to wait until later to start planning!

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Source: Financial Visions, Inc.

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~Tax Law Advisors provides customized pre-tax planning today, so Corporations and their Owners can enjoy a better tomorrow.~

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Historically, most Americans have considered 65 to be their target retirement age. This is likely the result of past Social Security laws, which provided full benefits beginning at age 65.

However, many workers today are retiring at an increasingly earlier age. In just the last few years, for example, the average retirement age has fallen to age 63. And many younger workers are planning to retire even earlier; in fact, according to a recent study by the Employee Benefit Research Institute, more than a third of today's workers plan to retire before age 64.

What You Give Up

An early retirement often comes at a cost. Here are a few of the financial results of early retirement that you must consider carefully:

Not only are Social Security benefits reduced for early retirement, but the age at which full benefits begin is being gradually raised to 67.

Retiring early often happens right at the peak of your earning years, meaning you not only forego that income, but also the resulting saving and investing that would have taken place in these years.

The annual benefit provided by employer-sponsored defined benefit pension plans is usually based on a combination of years of service and your ending salary. Both are reduced by early retirement.

Health care costs tend to increase for retired individuals. Benefits that were once paid for by employer-sponsored coverage often become the responsibility of the retiree.

Consider Your Options Carefully

Choosing when to retire is one of the most important financial decisions you will make. Consider your options carefully. Careful planning can help ensure you a comfortable and financially independent retirement.

1. "2006 Retirement Confidence Survey," Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Source: Financial Visions, Inc.

>~Tax Law Advisors~Tax Law Advisors~Tax Law Advisors~Tax Law Advisors~

~Tax Law Advisors provides customized pre-tax planning today, so Corporations and their Owners can enjoy a better tomorrow.~

~Tax Law Advisors~Tax Law Advisors~Tax Law Advisors~
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There are some upsides to being a retiree - senior discounts, lower taxes, subsidized healthcare, and regular Social Security checks among them. On the other hand, mature Americans must contend with worrisome issues such as rising costs for medical care, long-term care, prescription drugs, and even basic necessities such as food and energy.

To determine your monthly expenses during retirement, you might start by dividing costs into two categories: those you believe will change and those you believe will remain largely the same.

Costs You Believe Might Change

Housing expenses - particularly if you plan to live in your paid-off home or plan to downsize to a smaller dwelling

Medical insurance - which may shift from a premium for HMO coverage to a Medigap policy

Costs for dependents - if you have children you believe will be self-sufficient by the time you retire

Entertainment and travel expenses - for some people, these might decline precipitously; for others, they might be far higher

Taxes - most retirees find their combined tax burden is less than during their working years

Automobile-related costs - retirees generally drive less than workers who commute to their jobs every day, thus spending less on maintenance, tolls, gasoline, etc.

Monthly contributions toward retirement savings accounts - not only can you stop making this contribution, you might even consider spending it!

Costs You Think Will Remain the Same

Food

Clothing - unless you previously spent large amounts of money on uniforms or other job-specific wardrobe items

Household expenses - such as telephone, utilities, cable, etc.

Determine Your Individual Needs

Once you analyze all this information, you can determine your estimated monthly income needs as well as how large of an emergency fund to establish. This fund should be held in a liquid form such as a money market account, which provides stability for your funds as well as ready access to them.

Consider reviewing your estimated needs at least annually, because circumstances can and do change in today's fast-moving world.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Source: Financial Visions, Inc.

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