Retirement Planning
Table of Contents:
Chapter 1: Retirement Planning Towson, MD
Chapter 2: Harvesting Retirement Strategies for Towson Residents
Chapter 3: The Importance of Regular Portfolio Reviews
Chapter 4: Retirement Planning for Towson Business Owners
Chapter 5: Retirement Planning for Towson Attorneys
Chapter 6: The Benefits of a Full-Service Firm
Retirement Planning Towson, MD
Retirement planning is the process of defining your retirement goals and income needs, then building an investing strategy to provide for those goals and needs. While planning for retirement is something everyone should do, the actual planning process is highly individual. Chances are your dream retirement doesn’t look like your coworker’s or your neighbor’s. It’s something tailored just to you, built on your personal dreams and desires.
Your retirement plan should be as individual as you are. This is why we’ve built this page: To address the unique retirement planning concerns of Towson, MD residents.
What You Need to Know About Retiring in Maryland
Oliver Wealth Management’s Retirement Checklist
Harvesting Retirement Planning Strategies for Towson Residents
Retirement planning begins with envisioning what retirement looks like for you. Start by asking yourself questions to define your dream retirement:
- What do you plan to do in retirement? Perhaps you’ll travel more, or maybe you’ll spend time at home with grandchildren.
- Do you have friends and family that you can visit with once you’re retired?
- Where do you want to live?
The answers to these questions will help you determine how much your retirement lifestyle will cost. If you know you want to stay in Towson, MD, for instance, you can use the cost of living in Towson adjusted for inflation (which is generally 2 to 3 percent per year) to determine how much your daily living expenses may be in retirement. Add in other costs, like how much you think you’ll spend on travel or daily activities and your anticipated health care, to get your full retirement cost of living.
Make sure you are on the same page with your spouse or longtime partner and discuss your plans with him or her as well as with your financial advisor.
Defining your ideal retirement tells you the destination you’re working toward with your retirement plan. Once you know your destination, it’s time to pinpoint your starting point. Look at where you are now in your financial journey. How many years do you have until retirement? How much do you currently have saved for retirement?
Once you know your starting point and destination, you can choose the retirement planning strategy that will get you from today to retirement. Your strategy should incorporate an investment plan with tax-advantaged strategies, such as using a combination of pre-tax and after-tax retirement accounts. Include in your plan how much you’ll save each month or year for retirement and where you’ll invest those savings. Don’t forget to factor in how much you expect to receive from Social Security and a pension, if you’ll receive one.
In addition to the Maryland State Employee Pension System, Maryland State employees, including contractual employees, can also participate in three supplemental retirement programs: A 457 Deferred Compensation Plan, a 403(b) Tax Deferred Annuity Plan or a 401(k) Savings & Investment Plan.
You can start contributing as soon as you’re hired, but must contribute at least $5 per day. The maximum you can contribute varies by plan.
Harvesting Retirement Planning Strategies: 3 Questions You Need to Answer
The Importance of Regular Portfolio Reviews
Building your retirement plan is only the first step in the retirement planning process. Once you have a plan, it’s important to have regular reviews to ensure you’re still on track to reach your goals.
You should stay in regular communication with your financial advisor as you move along your retirement planning journey. Reviews are especially important when major life events occur, such as if you get divorced, have a child, or change jobs. Anything that impacts your lifestyle today or could alter your lifestyle in retirement should be addressed as soon as possible.
The Importance of Regular Portfolio Reviews
Retirement Planning for Towson Business Owners
Business owners face additional challenges when it comes to retirement planning: When you’re self-employed, your retirement is entirely in your hands. It’s up to you to select and set up your own retirement plan.
Business owners have a few retirement plan options: A Simplified Employee Pension Plan (SEP IRA), Savings Incentive Match Plan for Employees (SIMPLE IRA), or a Self-Employed 401(k) plan. The best retirement plan for you and your business will depend on what you’re looking for.
To help you identify the best retirement plan for you and your business, consider these 3 key points:
- What is more important to you: Being able to contribute a higher amount or having an easy plan to set up?
- Do you have or expect to have employees other than your spouse?
- If you do have “common law” employees, would you like for your employees to be able to contribute to the plan?
If maximizing your contribution limits is of key importance, a self-employed 401(k) is likely your best option. These provide the most generous contribution limits (up to 25 percent of eligible compensation up to $56,000 in 2019), but can only be used if you have no common law employees. However, self-employed 401(k)s require more maintenance than other plans. These plans are also the most restrictive in terms of withdrawals: You can only access the funds if there is a “trigger event,” such as the termination of the plan.
Both SEP IRAs and SIMPLE IRAs allow for withdrawals at any time. But these withdrawals will be subject to taxes and may incur a 10 percent penalty if taken before age 59-½.
The easiest plan to set up is the SEP IRA. There’s typically no maintenance fee and the plan is available to you and your employees. However, only you can contribute; your employees can only make traditional IRA contributions to the account. You also must contribute the same percentage to your employees’ accounts in years when they contribute to their own accounts.
SIMPLE IRAs are available to business owners with no more than 100 employees. With a SIMPLE IRA, employees can defer up to $13,000 of their salary to the plan with a $3,000 catch-up contribution for those 50 years of age or older in 2019. As the employer, you must either match 100 percent of the first 3 percent of employees’ deferrals, or make a 2 percent non-elective contribution on behalf of all employees. SIMPLE IRAs also often have an administrative fee and require certain employee notifications.
Make sure you talk with a financial advisor who has experience working with small business owners before making a decision.
5 Retirement Planning Tips for Small Business Owners
Retirement Planning for Towson Attorneys
Like business owners, attorneys face unique challenges to retirement planning. Here are 4 questions Towson attorneys should ask themselves while retirement planning:
When will you retire?
Many firms encourage partners to retire earlier so younger attorneys can move up. As a result, you may find yourself retiring earlier than you planned. This can throw a wrench in your retirement plan as it’ll mean your savings need to cover you for more years.
To compensate for the added years, some attorneys choose to consult part-time after retiring from their firm. If you do consult, you may be eligible to continue saving into self-employed retirement plans.
How will your pension be paid?
It’s common for attorneys to be unclear on the terms of their pensions, and with retirement potentially coming sooner rather than later, this could put you in a tricky spot. Your pension is likely to be a core component of your retirement plan, so figuring out how it will be paid (lump sum or monthly benefit) and how much you can expect to receive is an essential part of retirement planning for attorneys.
This means you should also stay current on any changes to your pension plan that may occur between now and retirement. Many firms are discontinuing or converting traditional defined benefit pension plans to cash-balance plans with a fixed contribution. If you’ve been contributing to your pension for many years, this could result in a benefit cut, which will need to be factored into your retirement plan.
How much will your expenses be in retirement?
A common retirement planning pitfall is underestimating how much living in retirement will cost. The challenge is not only figuring out what your expenses will be, but also how those expenses will inflate in the years to come. Health care and taxes are notorious for catching attorneys by surprise in retirement.
Given their high salaries, attorneys frequently leverage pre-tax retirement accounts during their accumulation years. But this means that whenever you withdraw from your pre-tax retirement account, you’ll need to pay taxes on that money. Consider working with a financial advisor who can help you build a tax-management strategy in retirement.
Do you have a plan for reducing debt?
Given the challenge of meeting future expenses in retirement, reducing any debt you currently have should be an integral part of your retirement plan. Consider paying off your mortgage before retirement, and make sure you don’t retire with any high-interest debt, such as outstanding credit card balances. It’s much easier to address debt while you’re still earning a salary; once your sole source of income switches to your investments and savings, you’ll want to minimize your bills.
For attorneys, there can be the added challenge of accepting how your lifestyle must change in retirement to account for these rising expenses. When you’re used to a regular and generous income, it can be hard to learn to stop spending as freely in retirement as you did during your working years.
How to Save For Retirement as an Attorney
The Benefits of a Full-Service Firm
Retirement planning can be a confusing and complex process. There are a lot of moving parts to work through, from knowing how much your dream retirement lifestyle will cost to figuring out how much to save and invest today to make your dream a reality. This is where a full-service firm can come in handy.
A local financial planning firm in Towson, MD will understand the unique challenges faced by Towson residents as they plan for retirement. The right financial advisor should also be able help you with estate planning, investment management and risk management before and during retirement.
Retirement planning doesn’t have to be daunting. With the right help, you can build a plan to help ensure your retirement dream becomes a reality.