Retirement Financing — Retirement Planning

Retirement Planning

For most of us, our working days will come to an end, whether we’re prepared or not. These years can be the most rewarding, fun, and productive time of your life, but you need to get ready, both emotionally and financially.

This page will explain the basics, but it is not a substitute for financial advice. If you are considering how you should plan for retirement, seek guidance from a professional.

Getting financially fit for retirement

  • Tax-deferred savings—If you’re employed, it’s a good idea to enroll in your company’s 401(k) or other retirement savings plans. If you can, contribute the maximum allowable and at least enough to qualify for any matching funds your company offers.
  • Individual Retirement Accounts (“IRAs”)—There are two kinds of IRAs for individuals: Traditional IRAs and Roth IRAs. The main difference between the two is when you pay taxes on the money you put into the plan.

    With a traditional IRA:
    – You pay taxes on the back end when you withdraw the money in retirement.
    – Your money grows tax-free while in the account.
    – Almost any individual can qualify to contribute.
    – You must begin to withdraw by the time you reach age 70.5.

    With a Roth IRA:
    – You pay taxes on the front end, before you deposit the money into the account.
    – Your money grows tax-free while in the account.
    – There are certain income limits on who can qualify to contribute.
    – You can leave the money in for as long you’d like—there is no mandatory withdrawal age.
    – You may be allowed to withdraw some of the money early, under certain circumstances.

  • Pension—Your employer may offer a pension plan, which will allow you to receive benefits after retirement. Ask your Human Resources Department to provide written information about the plan and an estimate of what your pension payout is likely to be. Keep this information, including retirement plan brochures and savings statements, with your other important papers. Some questions to think about:
    – Will pension be paid in monthly checks at retirement or a lump-sum payout?
    – When do you become “vested’’—the point at which you can change jobs and still receive a pension?
    – What happens to it if you die while still employed—will your spouse get a survivor’s benefit, and how much will that be?
    – Under your company’s plan, will your pension check be reduced by your Social Security benefit? By how much?
    – Is the pension insured, so that you can count on it even if your company is sold or goes bankrupt?
  • Reducing debts—Work on paying off your debts before you retire. It’s a good goal to start off retirement with low (or zero) balances on credit cards, no car payments, and if possible, a paid-off mortgage.

Decisions impacting retirement

No matter how long you’ve looked forward to it or how carefully you’ve planned, you may find yourself unsettled when you’re no longer in paid employment. There are adjustments to make, so spend some time considering how and where you want to spend this next stage of your life.

Should you move?

The equity in your home may be your greatest asset. If your children have moved out, the house may feel too big and the property too demanding to keep up. You may consider selling it, investing the profits and moving to a smaller home or apartment. Or, you may have longed for a warmer climate or a place by a lake. If you’re thinking of relocating, do your research before making a decision. Visit the area during all seasons, and stay more than a few days. A great vacation spot may not be so much fun all year around, especially if family and friends are far away.

Should you work?

Consider part-time employment or a second career. It can give a chance to try out something new, will supplement your income, stretch out your savings and keep you engaged. If you don’t need the extra income, consider volunteering to keep your skills sharp and give back to your community. If you’re receiving Social Security benefits, extra income may affect your monthly payments. Get the details at www.ssa.gov.


This site is for education purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.