Planning for Retirement

 

to achieve an income in retirement equal to an average of your earnings in your three consecutive highest-paid years, to a maximum of around a hundred thousand per year. That amount will be indexed each year. Your contributions will be based on your current income, how many years you have left until retirement, life expectancy, and other actuarial concerns.

"This type of plan can, on occasion, be a very prudent choice. For example, if you have few years left until re-tirement, a defined-benefit plan will enable you to make significantly larger annual contributions than either of the defined-contribution plans. However, these plans are much more expensive to set up and administer than the other alternatives.

"It's imperative, I repeat, imperative, that before you set up your Keogh plan, you consult a qualified accountant, attorney, or financial planner for advice. Deciding which type of plan best suits your needs will be greatly aided by the advice of an experienced, knowledgeable professional.

"I have just a couple more Keogh pointers before we move on.

"One: Although Keogh contributions, like IRA contributions, need not be made until April fifteenth of the following year or, at the very latest, the extended filing deadline of August fifteenth, the Keogh plan must be set up by December thirty-first of the year for which the deduction is claimed. If you're going to set up a Keogh, get moving.

"Two: The advice I gave you regarding IRA investing also applies to Keogh investing: Start now in order to take maximum advantage of compound interest; don't withdraw early and therefore subject yourself to penalties and to opportunity cost; contribute early in the year, if possible;