It’s never too early – or too late – to do retirement planning.

On the one hand, the younger you are, the more you benefit from a longer period of time to accumulate assets and invest them, as well as think about how best to spend them once you finally retire. Even if you make some mistakes in the process or become preoccupied with other matters for a year or two, time will generally be your friend.

If, on the other hand, you’ll soon be retiring or have perhaps retired already, you’ll want to use the time and resources you have wisely. Still, with a few adjustments here and there, you may well be able to make your retirement years more enjoyable.

Whatever your circumstances, be sure to consult professionals with expertise in areas such as:

• investments
• taxes
• budgeting and cash management
• various types of insurance
• estate planning 
• medical, social, and other services geared toward retirees

With this in mind, Bucknell University offers the following list of basic points to consider:

1.  Determine how you’d like to spend your retirement years. Many people travel, devote more attention to family and friends, increase their volunteer involvement, or concentrate on hobbies and leisure activities. You’ve earned this time to focus on your own mix of passions and pastimes. Remember, retirement has several phases, so allow for development of new interests while remaining flexible to accommodate possible changes in health and mobility.

2.  Try to get a good sense of what your desired lifestyle will cost. In large measure, this will be a function not only of what you want to do, but also where you live – both the part of the country (or the world) in which you choose to settle and the nature of the four walls you’ll be calling home. Recognize too that you won’t necessarily live in the same place throughout retirement. Moreover, continue to budget for things that are elements of your life currently such as personal and health care expenses (Medicare won’t cover all of them!), food, clothing, transportation, emergencies, and our seemingly constant companion: inflation.

3.  Save as much as you reasonably can and invest appropriately. Many who plan on a modest lifestyle in retirement feel it’s possible to “over-save.” Yet people often underestimate – sometimes significantly – what their desired lifestyle will cost. Others may be quite realistic about what they will need but have difficulty putting enough aside over the years or fail to manage responsibly whatever wealth they have been able to amass. Whatever your situation, building your nest egg should be a high priority.

4.  To the extent possible, maximize the financial resources you can draw upon in retirement. A number of options exist, among them:

Defined-benefit pensions – Traditional pension plans have become rare but are quite valuable. Your employer is responsible for all contributions to your plan, and pensions provide reliable payments that are taxable as ordinary income.

Defined-contribution plans – These employer sponsored retirement plans, 401(k) and 403(b) plans being most prevalent, feature annual contribution limits and are typically funded with a combination of contributions by your employer and pre-tax portions of your salary or wages. Account balances grow tax-free, but distributions are taxable as ordinary income.

Traditional IRAs – Depending on your level of income, traditional IRAs can be funded with your own pre-tax money or, less commonly, after-tax money. Traditional IRAs can also receive money “rolled over” on a tax-free basis from employer sponsored plans, such as 401(k) plans. Account balances grow tax-free. When distributions from a traditional IRA are taken, they will be taxable as ordinary income in proportion to the amount of pre-tax money you contributed or rolled over.

Roth IRAs – These, too, are funded with your own money, specifically after-tax dollars. This means that both earnings and distributions come out tax-free. Also, whatever remains in the account grows tax-free. Note: Some employers offer Roth 401(k) plans, although these are relatively rare.

Tax-deferred annuities – Your after-tax money invested in these products grows tax-free. Any increase in value beyond the amount you invested is taxable as ordinary income when distributed. Remember to seek competent professional guidance, as tax rules (simplified above) and investment choices are complex. Decisions such as when to begin drawing social security payments or whether to roll retirement plan assets into an IRA will require careful planning.

Individually owned savings and investment accounts, certificates of deposit, etc. – These are funded with after-tax dollars, plus whatever you earn is taxable. Some of these investments produce capital gains, which are generally taxed more favorably than interest and other sorts of ordinary income.

Employment – For some people, “retirement” means continuing to work a bit longer, albeit on a part-time basis. Similarly, working full time for an extra year or two can make additional assets available for use in connection with one or more of the options above.

Social security benefits – Despite concerns about the long-run health of the social security system and the size of benefits one can count on, this extremely common form of retirement cash flow definitely needs to be taken into account.

Non-financial assets – Things that save you money can be just as valuable as a stream of payments. Examples would include good health, smart purchasing, and having loved ones nearby and available to help when needed.

5. Consider ways to support Bucknell that result in cash flow. If you are precluded from making additional contributions to your IRA or qualified retirement plan, a charitable life income plan can be an especially attractive supplement to existing arrangements. Here are some of your choices:     

• A charitable gift annuity provides generous, tax-advantaged, fixed payments for life (or for the lives of up to two individuals you choose), and an immediate income tax charitable deduction. Your payments can begin immediately, or you can defer them to a time of your choosing.
• A charitable remainder trust provides income for life and offers the flexibility of naming multiple income beneficiaries and charitable remainder beneficiaries. This common charitable strategy provides an immediate income tax charitable deduction and payments can begin immediately or be deferred to a time of your choosing.
• You can deed a personal residence – including a vacation home – to Bucknell University subject to a retained life estate. This arrangement enables you to continue living in your home or using your property as long as you wish. The older you are, the larger the immediate income tax charitable deduction you receive.
• If you are age 70½ or older, you can make a Qualified Charitable Distribution (QCD), also known as a charitable IRA rollover, to Bucknell University directly from your traditional or Roth IRA of up to $105,000 in 2024, and the gift will not be counted in your income.  Once you are 73 or older a QCD will satisfy your annual minimum required distribution and permit a tax-free gift of up to $105,000 to Bucknell University.

Importantly, because retirement planning vehicles such as defined-contribution plans, tax-deferred annuities, and many IRAs contain income that has never been taxed, you’ll want to devote attention to your beneficiary designations. Previously untaxed amounts left to family members and other individuals will be taxed when received by them but are not subject to tax when received by Bucknell University. Likewise, tax savings can be combined with providing for heirs when certain retirement plan assets are used for a gift annuity or a charitable remainder trust at the end of your life. This planning technique, called a testamentary charitable life income gift, may be even more attractive due to elimination of the “stretch IRA” as part of the recently passed SECURE Act.  

Regardless of the combination of options you assemble and draw upon, be sure to seek competent professional guidance. Tax rules are complex and subject to change and investment choices are considerable. Decisions such as when to begin drawing social security payments or whether to roll retirement plan assets into an IRA require careful planning.

Now that we’ve given you plenty to think about, please let us know if we can be of any assistance to you and your advisers!