Financial Planning for Retirement

Financial Planning for Retirement


Financial planning for retirement involves making arrangements for compensation upon retirement. Financial retirement plans in the U.S. are defined in tax terms by the IRS code.Financial Planning for Retirement

The Department of Labor’s provisions under the Employee Retirement Income Security Act (ERISA) regulates these financial instruments.


Financial retirement planning involves a Defined Benefit or a Defined Contribution plan.

Examples of Defined Contribution Plan include Individual Retirement Account (IRA), 401(k), Roth 401(k), and profit sharing plans. Participants in these plans are responsible for selecting the types of investments toward which the funds in the retirement plan are allocated.

These plans usually don’t allow any withdrawals from the fund until a certain time (capital lock), with the feature of some form of financial penalties should someone does decide to do so.

Financial planning for retirement with a defined benefit plan involves retirement accounts which is set up and managed by an employer. These plans assure a set payout at retirement. Calculation for compensation is based on salary and tenure of an employee, and not on interest.

These plans can further be classified into pensions and cash-balance plans, and may either be funded or unfunded. An example of an unfunded plan is the social security system, in which contributions take the form of the Federal Insurance Contributions Act (FICA) taxes, and are thus withheld from most paychecks.


Financial retirement planning is also available to those who are considered self-employed. The Simplified Employee Pension (SEP) IRA, Simple IRAs and individual 401(k) are geared toward the self-employed segment of the economy. Benefits include up-front tax breaks and tax-deferred savings.

Estate Planning, Life, and Health Insurance Plans:

Most financial planning for retirement involves health and life insurance products. These plans give low net-worth individuals a quick and affordable access to otherwise hard to access investment classes. These plans include products that diversify an investor’s contribution into several sub-classes like cash, bonds, stocks, commodities, etc.

Estate planning includes trusts and committees that safeguard your assets and their distribution in the event of one’s demise or during old age (usually when someone is incapable of conducting his/her own affairs due to old age).

Financial planning for retirement is at an utmost urgency, as the given times we live in, and the state of affairs of world economy is ever so unstable, not knowing where to look for provisions for retirement and family. The timing is just about right now!

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