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Even if you receive benefits from Social Security and an employer-sponsored
retirement plan, your stool will have only two legs, and you will probably
not have enough income to live comfortably at your pre-retirement level.
Your retirement savings program should be the strongest leg on your stool,
because it supports the other two.
Few people find it easy or fun to save for retirement. Many people have
trouble putting money away that they won't use for 20 years or more. Many
women find it difficult to save because current needs consume most or
all of their income, and unexpected emergencies may frequently occur.
Every dollar set aside today can more than double, or even quadruple,
however, if it can grow tax-deferred or is invested wisely.
- Currently, only 12 percent of workers without an employer-sponsored
pension have IRAs.
- Married women earning more than $35,000 ($50,000 filing jointly)
who have an employer-sponsored retirement plan or whose husbands have
pensions cannot contribute to an IRA without a tax penalty, but the
funds still grow tax-deferred. Currently, full-time homemakers are penalized
as well. They are not earning an income so they cannot make a contribution,
although their spouse may contribute up to $2,000 in their behalf each
year.
In 1994, 71 percent of white women, 25 percent of black women, and 33 percent
of Hispanic women had income from investment assets.
Once you are retired you can use your savings (both interest income
and principal) or use interest income only.
Now that you have identified and estimated all your potential income
sources,
- Evaluate which will be permanent, temporary, stable, or will fluctuate
in value.
- Know what pay-out options and tax treatments exist for each income
source.
- Know which sources will end or be reduced with the death of your
spouse or former spouse.
- Know how each income source would change should you separate or divorce.
You may decide that your life insurance coverage can be reduced, annuitized,
or eliminated. Ask your agent to provide details about the following options:
- Using the accrued cash value to fund a paid-up policy with a reduced
level of protection,
- Continuing the policy as term insurance for a specific period, or
- Canceling the policy and using the cash value to buy an annuity or
other investments
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