Planning for Retirement

 

Heresy, I thought. After all Roy had done for us, how could Cathy possibly disagree with him?

"Thirty years from now, I'm sure, repeat, sure, that you'll regret your decision, but I do agree that your points make sense—especially the one about being able to sleep at night. That's an important part of any investment decision.

"We still have a number of things to cover, so let me end our discussion of IRAs with some very important tips. One: Make your IRA contributions as early in the year as possible. Just because you're allowed to wait until April fifteenth of the following year doesn't mean that you should. If you have the money sitting around, get it out of a fully taxable situation and into a tax-deferred situation ASAP. Not only will contributing early year after year eventually increase your IRA value by tens of thousands of dollars, but it will also rid you of the temptation to blow the money on something frivolous! And, if you're going to go the fund route, why not set up a preauthorized checking arrangement again? Forced savings—you can't beat it.

"Two: Dave, and you two once you're married, name your spouse as beneficiary of your IRA. Then, in the event of your death, your IRA can be rolled over into your spouse's IRA with no tax ramifications. That is not the case if your plan is left to your estate or to a third party. "Three: If you want to follow James's example of placing most of your tax-deferred monies in CDs and comparable investments, keep this strategy in mind: Open up a self-administered IRA, that is, an IRA that allows you to manage your own investments, and then buy a monthly-pay, five-year CD. Then, each month, buy an equity fund with the interest—all within the self-administered plan, of course. It's beautiful—all your capital is guaranteed, yet you're still reaping the benefits of