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ARLEDGE & ASSOCIATES Q&A: A LOOK AT RETIREMENT ISSUES

Retirement can be very overwhelming when you are just getting started. It can be daunting to determine how much you need to save in order to comfortably retire. The key is to start as soon as possible and not put retirement planning to the side because it sounds too difficult.


Where do I start?

At a minimum, you want to start with contributing to your employer’s retirement plan up to the amount your employer will match. How far will that get you? Let’s say you have an income of $50,000, and you contributed 3% of your income and your employer matched it, that would be a total contribution for the year of $3,000. If you continue to contribute 3% every year and you invest that in mutual funds for a 7% return; then in just 30 years you would have a little over $300,000. While that example is at least a good start we are going to have to do more.


How should I make up the rest of the retirement money? What if my employer doesn’t offer a 401K plan?

There are multiple ways to prepare for retirement, and it will depend on your situation to see what will fit you the best. You can setup an IRA (Roth or Traditional), Health Savings Account, simplified employee pension plan (SEP) account, or maxing out your contributions to your 401K just to name a few. Each of these accounts has a limit on how much you can contribute each year, so make sure you are aware of how much you are contributing.


If setting up an IRA, whether traditional (pretax) or Roth (after tax) account, you can reach out to a local financial advisor, and they can help you set up an account within a short amount of time.


A health savings account is an option if you have a high deductible health plan. You can contribute money pretax. The money in your health savings account can be invested once your account reaches a certain threshold, anything in excess of the threshold can be invested. The account provider will know what the threshold is for your specific account. I have seen some thresholds as low as $2,000 and others as high as $5,000.


If you are self-employed and do not have a 401K option, a simplified employee pension plan (SEP) account could be right for you. Again, a local financial advisor will be able to assist with this.


The main thing you want to do is get started, have your money work for you so that you do not have to. Even if you have to start small with only $50 a month, watching your funds grow is encouraging. Be active in your investment planning, but not obsessive, you want to make sure you have made wise investment decisions.


If you are saving for retirement over the course of 30 to 40 years, times change, what you invested in at the beginning may not be such a good investment years later, so make sure at least once or twice a year you evaluate how your investments are doing.


Mikayla Estes, CPA, is a manager at Arledge, an Edmondbased public accounting firm. Arledge is a recognized leader in the accounting industry offering practical solutions in the areas of tax planning, auditing, consulting, accounting advisory services and client accounting.


This article contains general information only and does not constitute tax advice or any other professional services. Before making any decisions or taking any action that might affect your income taxes, you should consult a professional tax advisor. This article is not intended for and cannot be used to avoid future penalties that may be imposed by the Internal Revenue Service.

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