Investment Issues

According to the U.S. Census Bureau, people today can expect to live longer in retirement than ever before. Increased life expectancies mean we’ll all probably have to do a better job of planning for our retirements and protecting our estate assets than previous generations. Working out a sound retirement plan now—before you need it—may help achieve retirement and other important financial goals.

Retirement Planning

Creating a retirement plan can help with a comfortable retirement. In drawing up your retirement plan, you should take into consideration the following:

• Your anticipated costs of living during retirement.
• Your current retirement assets.
• Your current retirement savings and investments.
• Your expected rates of investment, and present and potential inflation rates.

Once this information is determined, you can calculate any shortfall between projected retirement income and anticipated costs of living during your retirement. It’s important to plan so you have enough assets to get you through—not merely to—retirement. You might include in your comprehensive retirement plan such elements as:

• 401(k) plans.
• Roth or traditional IRAs.
• Education savings plans.
• Life insurance or annuities.
• Tax-advantaged investments.

Estate Planning

Most of us already know our estate includes every asset and debt we have. However, few of us probably also realize that:

• Federal tax rates begin at 45 percent and rise to 47 percent for estates valued at $1.5 million or more for 2005.
• Estate taxes are due within nine months of death.

To help meet estimated future needs, investors can employ the following strategies:

• Updating current estate plans.
• Titling assets to maximize the credit available against federal estate taxes.
• Purchasing life insurance for estate tax and settlement costs.
• Establishing certain irrevocable trusts, which may help remove assets from your taxable estate.
• Making gifts of $11,000 or less in order to reduce the value of your estate.

In short, talking with a financial and tax advisor regarding the adequacy of current estate and retirement plans is an essential first step for anyone interested in leaving behind a lasting personal and financial legacy.  IBI