CAI-NJ August 2021

THE RETIREMENT ROAD: Having your Ducks in a Row

By Alexander A. Pisani, CPA, MAcc, WilkinGuttenplan

T he third largest generation in the United States, with around 73 million people, is currently entering retirement age. In 2021, the oldest baby-boomers will be turning 75 years of age, while the youngest are just reaching 57 years of age. No matter where you fall along this timeline or if you are getting closer to retirement, it is important to have the adequate knowledge of the available retirement tools, the factors for maximizing and prolonging your wealth, and eventually, the most effective way of trans- ferring the fruits of your labor to chosen members of the next generation. As each stage of retirement has its own set of opportunities and challenges, everyone must have a good understanding of where they are and where the road to retirement will lead. Your 50s As the saying goes, it’s never too late to start saving for retirement. Many employees and entrepreneurs are starting to see the dim light at the end of the retirement tunnel, but they know with the ever-dynamic economy, especially in a post-pandemic world, continuing to work for the next 10 years seems likely and the less risky approach. While you are still making money and your major expenses are

starting to decline (mortgages, college costs, etc.), here are some items to help prepare for retirement: 1) IRAs: At 50 years of age, you can start to contribute an additional $1,000 (2021) in your personal IRA contri- butions, called catch-up contributions. This goes for both traditional and Roth IRAs (annual contributions are $6,000 under age 50 years old). However, for married taxpayers where a spouse may be active participant in another plan and adjusted gross income is more than $198,000, phaseouts begin, all growth and income will be tax deferred until withdrawn. Contributions may be deductible for income tax purposes in year they are made. 2) 401(k): An employee who is eligible to participate in an entities 401(k) plan can maximize their annual contribution up to the limit of $26,000 (2021), which is $6,500 in addition to the annual contribution for individuals under 50 of $19,500. Non-Roth 401(k)’s reduce taxable wages poten- tially during the peak of your income years to help minimize income taxes currently, while growing tax deferred until retirement/withdrawal. 3) SEPs: Simplified employee pensions (SEPs) are qualified retirement plans that self-employed taxpayers can create

vlbentley/iStock/Getty Images Plus

CONT I NU E S ON PAGE 46

44

A U G U S T , 2 0 2 1