The Road to a Happy Retirement

Ask any two people what a happy retirement looks like and you’re likely to get two very different answers. “Golfing every day and reading presidential memoirs,” one person might say, while another might wax poetic about taking an Alaskan cruise and spending time with grandchildren. Still others might enjoy the peace of mind that comes from feeling financially secure or the satisfaction of volunteering for a worthwhile cause or even working part-time to stay busy and active.

All of these visions for retirement are perfectly valid ways to spend your time, and it’s a good idea to share your definition of a happy retirement with your spouse. You may be surprised to discover that your visions vary slightly, but discussing your goals and priorities can help you create a joint vision that incorporates both of your needs. Share this vision with your financial representative so he can help you set a realistic budget for the activities and lifestyle you want during retirement.  Plus, he’ll be able to help you choose the investment vehicles that align with those goals.

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Depending on your financial goals and other factors, there are some retirement investment options you might consider:

  • 401(k): This is among the most popular retirement savings options because the money in a 401(k)—or a 403(b), the nonprofit equivalent to a 401(k)—grows tax-deferred, meaning you don’t pay taxes on the income until you withdraw money. Some employers offer matching funds, which can also help boost your retirement savings. If you need to access funds in your 401(k) before you turn 59 1/2, you might be able to take a 401(k) loan if your plan administrator allows it. Or, you could withdraw funds early, which could be subject to early withdrawal penalties. However, withdrawing money early or borrowing from your 401(k) means missing out on potential growth and possibly having less money when you retire.
  • IRA: An Individual Retirement Account (IRA) is another retirement savings vehicle that comes in a few different forms. Based on IRS guidelines for 2012, most taxpayers can contribute up to $5,000 per year to an IRA, according to Contributions to a traditional IRA may be fully or partially tax-deductible, while contributions to a Roth IRA are not tax-deductible. (However, your distributions from a Roth IRA may be tax-free if you satisfy the IRA’s requirements.) Simplified Employee Pension (SEP) IRAs are a retirement savings option for self-employed people who don’t have an employer-sponsored 401(k) or 403(b). SEP-IRAs have higher contribution limits  than traditional or Roth IRAs.
  • Deferred annuity: Generally, when you purchase an annuity, you make a lump-sum payment or series of payments, and in exchange, the insurance company makes ongoing payments to you, typically so you’ll have steady income during retirement, according to With an immediate annuity, you’ll often start receiving payments right away, while with a deferred annuity, you would receive payments in the future, perhaps when you retire.

Want to know more? An Allstate Personal Financial Representative  can answer your retirement-savings questions and discuss which investments vehicles might make sense for you and your retirement goals.

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