Two of Your Questions About Retirement Planning Answered

Retiring from your job and spending the rest of your life doing the things you enjoy is a dream that almost every wants to achieve. However, planning for retirement takes years of planning, saving and investing. Not surprisingly, this entire process can be extremely stressful, and this is especially true when you are nearing retirement and wanting to preserve your money. Due to these concerns, it should be no surprise that you may want some questions answered about retirement planning. 

Is Your Retirement Account Guaranteed?

Some people are under the impression that the money in their retirement account is guaranteed to be there when they retire. While this may be true in some cases, it should be noted that there is no way to guarantee the performance of investments. As a result, if you have a retirement account that is heavily invested and these investments lose value, you may not have as much available as you originally thought. 

Luckily, if you are working with a financial planner, these professionals understand this risk. They will devise strategies that are designed to ensure that you are continuing to see a positive return on your money without exposing you to unnecessary risk. 

Do You Have to Be Retired to Utilize the Funds in Your Retirement Account?

Another common misconception is that you will only be able to access the money in your retirement account when you have officially retired. Fortunately, this is not the case, and you can access and move this money how you please. However, it should be noted that this can have major tax implications for you. 

When you cash out a portion of your retirement account, it is often considered taxable income, and this can cause your yearly tax burden to dramatically increase. Also, many financial planners and investment banks will charge you a fee for prematurely withdrawing a portion of this account. These costs can quickly add up, and as a result, you should typically avoid doing this whenever possible. However, if you are facing an extreme financial emergency, this may be the only option that you have available to you. 

Planning for your retirement does not have to be something that you dread. Despite the complexity of this task, understanding the answers to a couple of important questions can help to dramatically improve the quality of your decision-making. By avoiding some of the most common pitfalls of retirement planning, you can help ensure that this is a dream you are able to make come true.  For more information, contact Duff & Associates.