Retirement Planning and Asset Protection Planning

Retirement planning refers to a host of services that seniors can access

As well as the process is undertaken to ensure their retirement goals become a reality. Retirement planning centers around assessing a senior’s readiness-to-retire and recommends the steps that can be undertaken towards it. This can include analysis of investments, cash flows, taxes, debt, real estate, defined benefits, and insurance policies. A retirement plan also takes into account the senior’s retired lifestyle goals, their expected income sources, and their planned retirement age. Retirement planning works towards a senior’s financial independence after they retire.

WellPath Partners
WellPath Partners

Retirement planning options are available from many different sources

Such as financial institutions like banks, investment firms, or employers. Employer options include pension plans or 401(k) plans, while banks are willing to offer retirement-oriented savings plans. Consultation with banks tends to be provided free of cost, while financial planners are known to charge fees for their advice. It is advised to consult different financial planners or advisors in order to get second opinions and prevent conflicts of interest. In addition to receiving professional advice, many seniors opt for the do-it-yourself approach, given the ever-growing supply of free web resources.

Here are some of the common types of plans available:

Individual Retirement Accounts (IRAs) are available in different forms, namely Traditional IRAs and Roth IRAs. A Traditional IRA is a tax-deferred account that discourages early withdrawals (before age 59 ½). Although IRA contributions are tax-deductible, the amount of annual contributions is limited by the government. This amount rises after a contributor turns 50. Roth IRAs function like Traditional IRAs except they lack penalties when withdrawing from the principal and interest income is not considered taxable income. However, in Roth IRAs, initial contributions are not tax-deductible.

WellPath Partners
WellPath Partners

Employer sponsored programs include

Defined Benefit Plans (DB), Defined Contribution Plans (DC), Profit Sharing Plans, and 401(k) plans. DBS allow for an equal payout for a set number of months during retirement. DCs allow employees to add monthly contributions towards the purchase of mutual funds or company stock, with possibility of employer contribution. In Profit Sharing Plans, employers make all the contributions, although this depends on how much profit they are willing to share. The most popular plans are 401(k)s, where contributions are tax-deferred and often matched by employers.

In addition to choosing a savings plan

seniors have a variety of options when it comes to distribution, which refers to the payout of money from a retirement savings plan. All cash distributions are taxed and early withdrawals are subject to a 10% penalty. Distributions are in lump sums or fixed installments, with each having its own incentives and requirements. Lump sums require the recipient to receive funds from all retirement plans of a company within single tax year and that the recipient no longer works for that company. If the distribution is under $70,000, the amount meets the requirement for Minimum Distribution Allowance (MDA). Under MDA, the amount smaller of $10,000 or half of the distribution minus 20% of the distribution amount more than $20,000, is not taxed.

Clients who don’t immediately need their retirement funds can leave their savings in their plans until they retire or turn 70½ whichever comes later. Their retirement funds will continue to grow tax-deferred with compounding interest; however, they won’t be able to make further contributions.

WellPath Partners
WellPath Partners

If a client is changing jobs or expresses dissatisfaction with their current retirement plan

They can always opt for a "direct rollover", which transfers the money from one retirement plan to another.

Any discussion on financial planning should be well-planned and should not be rushed. Please contact WellPath Partners or meet with another qualified financial professional before undergoing any financial planning.