Are you ready to retire?

Is your nest egg adequate?

It’s obvious, but the earlier you retire, the less time you’ll have to save, and the more years you’ll be living off of your retirement savings.  The average American can expect to live past age 78. (Source: CDC, “Deaths: Preliminary
Data for 2011”) With future medical breakthroughs likely, it’s not unreasonable to assume that life expectancy will continue to increase. Is your nest egg large enough to fund 20 or more years of retirement?

When will you begin receiving Social Security benefits?

You can begin receiving Social Security retirement benefits as early as age 62.  However, your benefit may be 25% to 30% less than if you waited until full retirement age (66 to 67, depending on the year you were born).

How will retirement affect your IRAs and employer retirement plans?

The longer you delay retirement, the longer you can build up tax-deferred funds in your IRAs–remember that you need compensation to contribute to an IRA. You’ll also have a longer period of time to contribute to employer
sponsored plans like 401(k)s–and to receive any employer match or other contributions. (If you retire early, you may forfeit any employer contributions in which you’re not yet fully vested.)

Will you need health insurance?

Keep in mind that Medicare generally doesn’t start until you’re 65. Does your employer provide post-retirement medical benefits? Are you eligible for the coverage if you retire early? If not, you may have to look into COBRA or a
private individual policy–which could be an expensive proposition.

Is phasing into retirement right for you?

Retirement need not be an all-or-nothing affair.  If you’re not quite ready, financially or psychologically, for full retirement, consider downshifting from full-time to part-time employment. This will allow you to retain a source of income and remain active and productive.

How much can I contribute to my IRA in 2014?

The amount you can contribute to your traditional or Roth IRA remains $5,500 for 2014, $6,500 if you’re 50 or older. You can contribute to an IRA in addition to an employer-sponsored retirement plan like a 401(k). But if you (or your spouse) participate in an employer-sponsored plan, the amount of traditional IRA contributions you can deduct may be reduced or eliminated (phased out), depending on your modified adjusted gross income (MAGI). Your ability to make annual Roth contributions may also be phased out, depending on your MAGI. These income limits (phaseout ranges) have increased for 2014:

Income phaseout range for deductibility of traditional IRA contributions in 2014

1. Covered by an employer-sponsored plan and filing as: Single/Head of household $60,000 – $70,000
Married filing jointly $96,000 – $116,000 Married filing separately $0 – $10,000

2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan $181,000 – $191,000

Income phaseout range for ability to fund a Roth IRA in 2014

Single/Head of household $114,000 – $129,000

Married filing jointly $181,000 – $191,000

Married filing separately $0 – $10,000