Retirement planning is a multipart process that evolves over time. To enjoy a secure, comfortable retirement, it’s smart to build a financial cushion to support your post-retirement lifestyle.
The first step in effective retirement planning is to consider your retirement goals and how many years you have left in your working life to achieve them. You then need to select the retirement account that most closely aligns with your needs, as well as adopt a level of investment risk you feel comfortable with.
Reward vs. Risk
Not all retirement savings accounts are created equal. Some reward you with attractive interest rates but come with the drawback of increased investment risk. While in the past they invested primarily in bonds and stocks, today’s pension funds may comprise a portfolio of investments in a variety of asset classes, such as gold, infrastructure, real estate, and private equity.
Accurately assessing retirement income needs
According to a 2019 survey by Schwab Retirement Plan Services, the average US citizen with a 401(k) plan believed they would need $1.7 million to retire. In reality, some will need less, but many will need more to maintain a comfortable post-retirement lifestyle.
Underestimating retirement costs is a common retirement planning mistake—and one that can cost retirees dearly. Many people expect that they will spend less money in retirement than they did throughout their working life. Although retirement will incur some significant reductions, the most obvious savings being retirement-plan contributions and commuting costs, retirement results in a significant change in daily activities that can in turn trigger substantial changes in spending habits.
Retirement savings accounts generally offer tax-saving incentives to encourage people to invest in their future. Nevertheless, with many retirement saving platforms, once retirees begin to draw distributions, this income may attract federal and state taxes, particularly where savers have benefited from tax deductions over the years on retirement savings account contributions.
Malta Pension Plans are an increasingly popular retirement savings vehicle, as they confer significant tax-saving potential. Contributions may be made in non-cash form, enabling you to invest non-cash assets such as stocks and shares, business interests, real estate, and even jewelry and works of art directly into your pension fund. This creates significant tax deferment potential, avoiding the need to liquidate assets before contributing their value to the fund, a process that often triggers capital gains tax liabilities. Conversely, with an IRA, all contributions must be made in cash.
And unlike a Roth IRA, there is effectively no limit on contributions to a Malta Pension Plan. While you can only contribute to a Roth IRA if your annual income is less than $173,000, there is no such limitation with a Malta Pension Plan.
Malta Pension Plans confer numerous other advantages, such as tax-free distributions from the age of 50, when you can draw an initial lump sum payment of up to 30 percent of the pension fund’s value. Is it of little wonder that many finance experts recommend Malta Pension Plans as the new, supercharged Roth IRA.