The goal of a retirement plan is to provide enough income to maintain your desired standard of living for the rest of your life.
Employer-Sponsored Retirement Plans
Additional Savings Vehicles
Individual Retirement Account (IRA) and Roth IRA: $6,000 annual contribution limit for 2022 with a $1,000 catch-up for individuals age 50 and older for a total annual limit of $7,000.
Employees do not have control over investment decisions with a pension plan, as contributions are made primarily by the employer. With a pension plan, you have the guarantee of a given amount of monthly income in retirement.
Benefits are based on your full retirement age (FRA), which is dependent on your year of birth. For most people, the FRA is between ages 66 and 67.
You can elect to start benefits at age 62 before you reach your FRA; however, taking benefits early will lower your benefit amount, while delaying benefits results in a much higher benefit amount.
If your FRA is 66 and you elect to start benefits at 62, your benefit will be permanently reduced by 25%, and the permanent reduction is 30% for those with an FRA of 67. Alternatively, if you delay benefits to as late as age 70, you will receive a delayed retirement credit (DRC) of 8% per year.
There is a lot more to Social Security than simply deciding when to trigger your benefit, especially if you are married or have ever been married.
An effective investment strategy carefully allocates across asset classes with the goal of maximizing return for a given level of risk. Aligning retirement funds based on how those assets will be used during retirement helps to ensure a higher degree of confidence throughout your retirement years. Put simply, you want to aim to shift your portfolio to become more income-oriented near and during retirement, especially in terms of the portion of your portfolio that will fund your monthly income needs.
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