Here’s what you need to know about financial retirement planning
What is financial retirement planning? Simply put, it is a financial arrangement that is devised in such a way that it successfully replaces your employment income when you decide to retire. The general trend is that these plans can be set up by employers or insurance companies or other organizations.
In the US, the provisions of the Internal Revenue Code form the basis for the various federal tax aspects. All the financial retirement plans are managed by the Department of Labor and are always weighed against the Employee Retirement Income Security Act. There are several types of financial retirement plans, but they are broadly classified based on how the profits are determined. The two categories are defined benefit plans and defined contribution plans. There are, however, certain financial retirement plans that imbibe in themselves the characteristics of both types of plans mentioned. Such a mixture is usually termed as cash balance plans.
One salient feature of financial retirement plans is the considerable tax advantages that they come along with. Moreover, the assets in the plan are also allowed to grow further. There are several ways in which one can finance a pension and thus, save up for retirement. However, this does not mean that one can turn a blind eye toward a prominent set of challenges that one might face, given the set of circumstances.
One such challenge that particularly has to be taken note of is the increasing birth rate combined with greater life expectancy owing to the advances in the fields of medicine and health care as well as better and improved living conditions for the average workforce. Nonetheless, it is apt to say that there are a huge array of options in the realm of financial retirement planning that one gets to choose from; each trying to suit their own needs.