Income Strategies for Retirement - 2
By Saghir Ahmed Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
When you know your goals and estimated expenses and income, you can create a written retirement plan that covers investments held in retirements and non-retirements accounts. As you do so, it’s a good idea to look at several sources of income that you can use to save and invest by considering using an Individual Retirement Account.
Two types particularly deserve attention - traditional IRA’s. Traditional IRA’s tend to work best for people who believe they’ll be in a lower tax bracket during retirement and meet the criteria for making tax-deductible contributions. Earning and contributions as ordinary income when withdrawn, and withdrawals prior to age 59½ may trigger a federal 10% penalty. Payments from the accounts must begin when the investor reaches age 70½.
The Roth IRA’s generally appeal to people who want tax-deferred earning, are ok with the idea of making after tax contributions now in exchange for tax free distributions in retirements and who expect to be in the same or higher tax bracket when they retire. Holders of Roth IRA’s often use them because they also may need access to their savings. The Roth IRA’s requires minimum distribution during the investor’s life time. With both IRA’s, investors make periodic contributions and direct how the money will be invested. Besides IRA’s, annuities2 also may have a place in your portfolio. An annuity is a contract between you and an insurance company in which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date. Annuities are designed to be long-term investments used for retirements. They have contract limitations, fees and charge that include, but are not limited to, mortality and expense risk charges, sales and surrender charges, administrative fees, and charges for optional benefits. These are imitational benefits.
These are limitations on the amount of funds that may be withdrawn without a charge, and withdrawals reduce annuity contract benefits and values. Additionally, withdrawals of earnings are subject to ordinary income tax, and a federal 10 % penalty may apply to withdrawals taken prior to age 59½. Annuities have two basic forms: fixed and variable. Fixed annuities appeal to conservative investors because they deliver a fixed payment at a regular interval. On the other hand, variable annuities generally offer a range of investment options, and the value of your investment will vary depending on the performance of the investment options you choose, which may directly impact the payments you are able to receive. Ultimately, proper planning may help you get the retirement you desire, if you know what your options are – and pursue both with resolve and clarity.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
