Understanding Retirement funds

Understanding Retirement funds
4 min read

What is the most important thing that you have ever planned for? A wedding, an MBA, or a world trip? I can tell you that your most important plan ever is to have a financially secure life, especially after your retirement. Anyone can work hard and earn good money in their youth and prime time. 

This is why I want you to understand how to think and prepare for saving. But first things first! Your retirement paycheck will usually consist of a social security cheque, a return on your pension funds, and your savings. These are the three pillars of your financial freedom. You need to understand what these are.

Social Security 

This can be considered to be your easiest contribution toward your retirement. It is understood that these payments form up to forty percent of a regular person’s post-retirement income on average. Your salary or monthly earnings have a deduction toward social security that you can contribute to yourself too. Mostly, it is equally contributed by your business entity or your workplace. You receive this money after you are retired, or unable to work. 


Like social security, your pensions are mostly the contributions that both you and your workplace will provide. The problem these days is that pensions are being reduced, due to economic and financial uncertainty, and even the U.S. government’s pension is not reliable. According to experts and stats from the Federal Reserve Bank, the United States may not be able to pay for its people’s pensions in the next thirty-to-fifty years due to the debt pile-up. 

This is why these contributions are being reduced and they already are around half of what you would have earned if you had worked in your pre-retirement life. So, this leaves you with your IRAS (Individual Retirement Account) and cash to add to your monthly income after you retire.

 Savings - Not Just Funds, But Also Those from Tax-Deductions

Your savings will be yours and they will depreciate as the value of your money will erode over time. Remember when you used to have a big mac for a dollar and a house for under 250k? Things have changed, right? They will surely do it in the future too!

So, what is your strategy? I believe that savings are mostly possible during your work life through what you can from your taxes. Your strategy should be to be as tax efficient as possible. Speaking of savings, have you heard of IRAs (Individual Retirement Accounts) and 401ks? 

People tend to max them out but forget that they are not tax-free. The taxes on them are deferred. What this means is that you owe tax money on all these savings to the government, and it will take what is due once the savings are eligible for a withdrawal.

Will you like it when the government takes twenty or thirty percent of your maxed-up savings that you set aside for your retirement? This means that the two million dollars that you saved in IRAs and 401Ks that you had will not be the amount, but rather a fraction less than what you might not have anticipated.

Instead, that fraction of money could have been saved through tax-savvy techniques and contributed toward your world tour. So, the next time you think of saving, research and read the fine print. If you cannot do so and do not know what to do next, then read out to a qualified investment advisory firm such as Significant Wealth Partners.

They will help amplify your savings and prepare you for your retirement — risk and carefree!

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Edward Harris 4
Joined: 10 months ago
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