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Personal Financial Planning 14th Edition

Personal Financial Planning (14th Edition)

Book Edition14th Edition
Author(s)Billingsley, Gitman
PublisherCengage Learning
Chapter 14, Section 14-1, TEST YOURSELF, Exercise 14-1
Page 566

Discuss the relationship of retirement planning to financial planning. Do investment and tax planning have a role in retirement planning?


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Financial planning involves looking at your entire financial situation and setting a plan to get you where you want to go.

It includes looking at the type of collateral you have (and all types of debt you have), your insurance and current availability requirements, company benefits such as 401 (k) plans, stock options or deferral plans, family status, job stability, spending, legal documents, retirement plans; Basically anything about you and your money.

The financial planner then shows you what types of accounts you should donate to, and that, in time, that should lead to the target amount or size of the account amount as you approach retirement.

Investment Advice:

Investment tips are just one small part of financial planning. It has to do with where you put your money and it can include choosing money within your 401 (k) plan, choosing stocks and bonds, and assessing the risk of investing in a new business.

Investment advisors often have specialties such as bond management, stock management, strategy management, or joint venture management using the asset-sharing method. Some investment advisers focus on hard work and evaluating other advisors to choose the right type of advisor for each category. Always ask an investment adviser what is special before hiring them. No investment adviser can have it all - so beware of someone who says they do it all. A good investment adviser knows when to seek out the external technology of certain parts of the portfolio.

Retirement planning:

Retirement planning involves a set of skills that go beyond a basic financial plan or offer investment advice.

A retirement planner should have a clear understanding of the financial assets you save, as well as other resources you have, such as pensions, social security, part-time, home equity, etc. meet in a way that will lead to the delivery of monthly payments when you retire.

A retirement planner will indicate how much retirement you can expect to have on that day, and which accounts you can withdraw from. They can show you how much you can expect to pay in taxes and health care costs. They show you how inflation can affect your spending needs, and what decisions will help you put your future at 80 years of age in a safer place.

Someone who just tries to sell you a product or tell you what to do with your money is not a retirement planner. As you approach retirement you will want to get a detailed indication of where your future income will come from.

An area of ​​investment strategies where tax efficiency is often overlooked in terms of the type of investment held in tax accounts after comparing them to retirement accounts. Talk to your financial advisor and tax advisor and get your tax bracket. After that, look at the distribution of your assets and decide on the most effective way to invest, given your specific circumstances.

Taxes play a vital role in your retirement plan because the money you earn from investing in post-tax accounts and the distribution from retirement accounts are taxed separately. It is envisaged that the minimum tax rate on long-term profits will be considered compared to the rate of tax on ordinary income and short-term gains. Additional consideration needs to be given to the impact that distribution may have on other income factors, such as taxing your Social Security retirement benefits.

Another area that has often been neglected in the retirement plan is the low income that you (or perhaps your parents) have for tax-free income. Tax deductions can be temporary or permanent. This is a great opportunity to take another retirement assignment. Also, talk to your financial advisor and tax advisor and find out the most effective way to withdraw money.

The last place in which income tax plays an important role in your asset planning. Different types of investments have different tax effects on income for your estate beneficiaries. Usually, assets held in a post-tax account will increase once they are inherited. This means that the beneficiary will not pay tax on the difference between what you paid for the investment and the amount of time you earned - and assets held in pre-tax accounts, such as traditional IRAs, will be charged to the beneficiary as normal income, as the beneficiary receives the allocation. You, your estate planner, your financial advisor, and your tax advisor should review the pros and cons of holding on to various types of investment vehicles.

Careful financial planning includes tax savings, retirement distribution, and asset planning strategies. Proper tax planning in each area will help you increase your investment profits, available cash flow, and savings.

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