Making the Most of Your Retirement Savings

Ed Slott & Company

The secret is simple, but not easy: pay attention and stay focused

Posted July 16, 2010

By Ed Slott & Company

If you want to have a comfortable retirement you are going to have to be a disciplined saver and make good investment choices.

We have written many times about contributing to IRAs and company sponsored plans as an effective way of helping you accumulate retirement income. These types of plans are great places to invest on a tax-deferred basis. You don’t have to worry about paying taxes on capital gains or dividends throughout your career. The only thing that really matters from a tax perspective is how much money you have when you start making withdrawals after you retire. If you have invested in a Roth IRA, you have paid the income tax as you made your contributions and now you never need to worry about taxes as you take withdrawals.

The ideal investment strategy for retirement accounts is to find great performers and milk them for everything they are worth. This strategy however involves risk. If your risk tolerance is low, you might want to consider conservative investments with little or no volatility, such as fixed annuities. If you purchase an annuity make sure it is from a reputable and financially-stable insurance company in order to ensure that the money will still be there when it comes time for you to make use of it. Plenty of horror stories abound regarding annuities that weren’t all they were cracked up to be. Strong marketing and heavy-handed sales pitches can get you into trouble in a hurry. Be sure to do your homework before purchasing an annuity.

Income tax rates on qualified dividends and long term capital gains are scheduled to rise as early as next year. It is also anticipated that the rates on the top income tax brackets will increase as well. Investing in IRAs while accumulating assets for retirement will help you avoid current income tax and, if you qualify to make them, deductible IRA contributions will provide you with an immediate tax benefit. Rising tax rates in the future also mean that this is a good time to do a Roth conversion. Beginning this year everyone qualifies to do a conversion.

Ed Slott and Company has been called "The Best" source for IRA advice by The Wall Street Journal, and "America's IRA Experts" by Mutual Funds Magazine. Ed is a widely recognized professional speaker and author. Get more IRA information from America's IRA Experts.