OCALA, FL — “Only people who like dog food don’t save for retirement,” says Dave Ramsey, nationally known money guru and founder of Financial Peace University. Citing a recent Gallup Poll, Ramsey notes that only 44 percent of Americans prepare for retirement. “I guess that means the other 56 percent are counting on Social Insecurity,” Ramsey quips.
That is true of people planning to retire in Ocala and The Villages, according to Kevin McDonald, whose company provides retirement planning solutions. “Most people don’t adequately prepare for the number of years they’ll spend in retirement,” McDonald said. “Statistically speaking, we’re all living longer and the cost of inflation over a period of years can dramatically impact the necessary resources to maintain standard of living in retirement.”
Ramsey recommends investing 15 percent of your household income into pre-tax retirement plans like the following:
- Individual Retirement Arrangement (IRA)
- Simplified Employee Pension (SEP)
- 401(k), 403(b), or 457
Ramsey feels the Roth IRA has proven to be the best investment option for several reasons:
- It promises a higher bracket at retirement.
- You can invest more money.
- It’s more flexible than other choices.
- You can withdraw your money, tax-free and penalty-free, at any time.
While most companies have done away with traditional pension plans, like the once popular 401(k), many still offer an SEP, a Simplified Employee Pension, that is also available to self-employed individuals.
What is a Simplified Employee Pension Plan?
The IRS website lists these basic steps in setting up an SEP:
- A formal written agreement must be executed.
- An SEP can be set up for a year as late as the due date of the business’ income tax return for that year.
- The SEP-IRA is owned and controlled by the employee.
- Each eligible employee must be given certain information about the SEP.
- SEP-IRAs can be set up with banks, insurance companies or other qualified financial institutions.
People should start saving for retirement as early in life as possible. While the above options offer the best possible savings plans, it’s wise to also look into a traditional savings account, stock purchases. mutual funds and bonds to grow your money.
Can I Afford to Retire in Ocala or The Villages?
There’s no telling how much money you will need at the time of retirement. However, CNN.com offers these considerations:
- One rule of thumb is that you’ll need 70 percent of your pre-retirement yearly salary to live comfortably.
- Make realistic estimates about what kind of expenses you will have in retirement. Be honest about how you want to live in retirement and how much it will cost.
- Take a close look at your current expenses in various categories, and then estimate how they will change.
- When you run the numbers, you should definitely factor in other sources of income, including Social Security, a traditional pension and personal savings.
- Many financial planners recommend that you save 10 percent to 15 percent of your income for retirement, starting in your 20s.
- Establish a savings target, one that tells you roughly how much you should set aside over time to meet your retirement goals.
- As a general rule, you’ll need at least $15 to $20 in savings to cover each dollar of the annual shortfall between your income and your expenses.
Questions about Retirement Planing?
The McDonald Agency, with local offices in Ocala, Summerfield and The Villages, can help you answer questions about retirement planning in central Florida. Click to request a online quote for Ocala home insurance or o schedule a consultation, call (352) 622-2333.
ABOUT THIS ARTICLE: This website (themcdonaldagency.com) is not intended to provide specific insurance advice for any individual or business entity and should not be relied on for such advice. Persons seeking insurance advice should contact an Ocala insurance agent by e-mail or call (352) 622-2333<em> to receive advice that takes individual circumstances into account.