Retirement planning is very important if you want to be able to enjoy your golden years in comfort. The best way to proceed is to sit down and discuss your future with a good financial planning attorney early on during your professional career.
This proactive approach to feathering your own nest is certainly a good one. But in fact most people are introduced to the most basic rudiments of retirement planning when they get their first “real job” when they are offered the opportunity to participate in a 401(k) plan.
Participation is certainly something that would be recommended, and you should take full advantage of any employer matches that are offered.
Another thing that you may want to do in an effort to feather your own nest for retirement would be to create an individual retirement account. Contributions into a traditional individual retirement account will be made with your after-tax earnings, but you will be required to pay taxes on income that you receive when distributions are made.
You are required to start taking distributions when you are 70.5 years of age, but you can start to take distributions without being penalized when you are as young as 59.5 years of age.
The concept of the “stretch IRA” involves leaving the remainder that is in the account to the beneficiary. Your beneficiary can stretch the resources in the account for as long as possible by receiving required minimum distributions. This spreads the tax responsibility out over an extended period of time.
The younger the beneficiary is the lower the required minimum distribution would be. So, if you were to leave the remainder to your grandchildren they would be able to draw less income than would your children, and as a result they would pay lower taxes on the distributions.