Forget About the Retirement Age
Some people reach a certain age – say, 55, 57, 59½, 62, 65 or older, and they feel it’s time to retire. Others reach a certain number of years on the job – say 25, 30, 35, or 40 plus, and it’s time for them to retire. You should forget about a set “retirement age” and instead focus on RETIREMENT ASSETS.
The website businessdictionary.com defines an asset as “something valuable that an entity owns, benefits from, or has use of, in generating income.” It further defines an entity as, “a person, partnership, organization, or business that has a legal and separately identifiable existence.”
Yes, there are certain ages that are significant, such as 59 ½, which is the age that the 10% early withdrawal penalty goes away for IRAs and other retirement account distributions and age 62 when someone can begin receiving a reduced Social Security benefit. However, there is nothing that prevents a 40-year old person from retiring if the assets they own are enough to provide them the income that a job provides. While you are working, you should focus on building assets that can provide you a level of income that allows you to retire at an age YOU select.
With many companies no longer providing the retirement security of a pension plan, 401(k)s, the Thrift Savings Plan (TSP), 403(b)s, and similar plans will be a primary source of retirement income for many Americans. Having a larger retirement account balance provides a greater potential for a larger income in retirement, but many workers do not have their retirement accounts structured in a way that gives them the potential for greater growth.
You should seek the counsel of an experienced financial advisor as you consider retirement to help you structure, build, and grow the assets you will use for retirement, such as reviewing your current investment choices in 401(k), TSP, or 403(b). How they are invested today will play a major role in determining your potential income in retirement.
Income for retirement shouldn’t be limited to retirement accounts. Investing for retirement outside of a retirement account could provide you income treated more favorably (taxed at a lower rate) from a tax standpoint.
While a person’s primary residence is widely considered an asset because a person can own it, benefit from it, and use it, some would say it’s not an asset because of its inability of generating income. Some at retirement take a lump sum distribution from their retirement account and pay off a mortgage. If you’re faced with this consideration, you should consult a financial advisor to analyze the pros and cons of doing so. You may unintentionally place yourself in a higher tax bracket and severely and permanently limit your ability to generate income in retirement.
Jones Wealth Management Group is pleased to offer a no-cost consultation to review your financial matters and documents such as retirement accounts and benefits offerings. Discussions of our personal financial situation are always conducted in strict confidence and kept private. Call today 901-312-9166 or complete our contact form (click here) to schedule your consultation.