The IRA is one of the most popular retirement savings vehicles. There are several variations, but in recent years, the Roth IRA has become an increasingly popular option. Roth IRA balances grew 51 percent from 2010 to 2013, while traditional IRA balances grew 28 percent over that same period. In 2013 more than $6 billion was contributed to Roth accounts, while only $4.61 billion was contributed to traditional IRAs.1
The Roth’s unique tax treatment is a big factor in its popularity. With a Roth you make after-tax contributions, which means you can’t take a deduction for the money you put into the account. However, your funds grow tax-deferred inside the Roth, and your withdrawals of earnings and interest are tax-free as long as you wait until age 59 ½. That means you can use a Roth to create a tax-free income stream in retirement.
Unfortunately, many people are unable to contribute to a Roth. Your income may exceed the Roth’s limitations. It’s possible that you’ve accumulated much of your retirement assets in a 401(k) or traditional IRA and don’t want to start a Roth from scratch.
What challenges will you face in retirement? For many seniors, one of the biggest financial obstacles is paying for long-term care. The U.S. Department of Health and Human Services estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care during retirement. Long-term care is usually needed for a few years, and 20 percent of those who need care require it for more than five years.1
Long-term care is usually needed because of cognitive disorders such as Alzheimer’s. However, it can also be needed due to things like strokes or mobility issues. Those who require long-term care may need help with things like eating, bathing, dressing or a wide range of other day-to-day tasks. Care is often provided either in a facility or in one’s own home.
As you might expect, long-term care can be costly. If you don’t have a plan in place, you may struggle to get the care you need. Below are three strategies you can use to fund your future long-term care needs. A financial professional can help you develop and implement a plan.
Here at MasterPlan Retirement Consultants, we strive to keep you up-to-date with informative articles. Read on for more details of the latest and greatest news.