Risk Exposure

The type of product you would invest in depends on the amount of risk you would like to be exposed to. During retirement, we don’t really have many sources of income. Hence, if you lose money on a risky investment, you would be left with nothing. If you, however, have millions in you checking account, you don’t have to bother much about the risk factor, not even about retirement. So, the type of retirement investment portfolio you must design, should depend on you risk taking ability.

Happy Life

Most people want to have a happy life after retirement from job. How much does it require to lead a happy life? Well, this depends on how you define happy. For some, happy means driving a BMW, and for others, it just means spending time with family. Decide what you would require to be happy.

Life Expectancy

We don’t really know how many years we would live after retirement, yet we will have to assume a figure in order to get started with retirement investment portfolio planning. If you assume you would live 30 years after retirement, you will have to plan accordingly.

Life Style

The retirement investment amount, to much extent, depends on how you would like to live your life after retirement. If you expenses are too high, you will need a bigger amount. If it’s low, you will need less. So, think about the lifestyle you intend to live before planning the amount.

The Actual Calculation

Say you intend to retire by 60 and you would like to live for 20 years after retirement, and the amount of funds you require to meet your expenses is $30,000 per year, then the total amount to live your retirement age would be $30,000 x 20 = $600,000. That sounds to be a very big amount. You don’t, however, have to accumulate it in a day or a year. If you are around 30 years old, you have another 30 years to save your $600,000 retirement amount.

So, the amount to be saved per year would be $600,000 / 30 = $20,000, which is approximately $1,666 every month, not a big amount. You investment amount would definitely grow due to compounding, and you expenses would also increases due to inflation. We haven’t, however, taken these aspects into consideration as they would make the calculation quite intricate.

Investment Options

Investment options are many. Select the ones that suits your needs and risk taking ability. For safe investment one can choose products like savings account, IRA, gold, 401k, etc. For a bit risky but high yielding ones, you can select mutual funds, stocks, etc.

• monthly payment
• single withdrawal
• as a life annuity, if the amount equals to or exceeds $3,500

The choice of Thrift Savings Plan withdrawal depends on you. You can use any or all of the above options to get back your returns. For instance, say you have $6,000 in your account, you can either withdraw the amount in full, or have a monthly income, or have half amount as monthly income and half as annuity.

If you intend to withdraw all the money from your TSP, you can do that effortlessly. You can also opt to transfer funds to your traditional IRA account, or any other eligible plan offered by employer.

If you intent to withdraw a predetermined amount every month, you must first make a choice of how much would you withdraw every month. You can have a fixed amount of dollars every month. Or you can seek help from the life expectancy table that provides a fixed amount every month for a fixed number of years.

If you intend to withdraw money in form of annuity, you have numerous options. You can go for a single life annuity, or a joint life annuity that would cover you wife as well with you, or another joint annuity that would cover a person other than the spouse. If, however, the amount accumulated in you TSP account is less than $3,500, you cannot demand a Thrift Savings Plan withdrawal in annuity. And if you select an annuity plan, you will be required to select any of the available features like 100% or 50% benefit, etc.

If you intend to have a mixed withdrawal, the regulation of each individual withdrawal would still be applicable. The tax withholding regulation, however, would differ for all the plans. For instance, if you wish to withdraw a part of your money as annuity and leave the remaining amount in the account, no amount of tax would be withheld. However, as payments are made on annuity, it will be taxed. If Thrift Savings Plan withdrawal seems to be a bit complicated, it would be wise to contact a financial expert before withdrawing any amount.

I don’t blame you. The federal government and finance industry, consciously or unconsciously, have initiated and protracted the retirement con. They generated several retirement schemes like IRA’s and 410K account along with financial investment benefits like index funds and mutual funds, which induces every individual to save funds and lock it in safety (some unsafe) boxes and lug it out when you aren’t quite fit to enjoy the wealth you have created.

The finance industry will, of course, promote saving for retirement. Till the time you are 60-65, they have generated fortune using your funds for several years. For them, it’s a source of capital.

And why will the government ask you to withdraw the money from their accounts? You are very much depended on the agencies they have created. The whole population is depended. This also keeps people slogging in companies and factories for years. If this isn’t the case, why do they charge you penalties and fees if you extract money from your own account to… to enjoy your own life? You have a better reason?

These strategies initiated by government, which should have been for the betterment of the population, are not rational anymore because:

-    Wealth generation isn’t what people are looking for today. Investing is good, but what’s the use of these accumulated funds if the reaped benefits cannot be enjoyed for most part of the life.

I am not against any IRA plans or the 401K nor do I oppose the idea of investing in index funds and mutual funds. However, I do oppose the system that penalizes and taxes the saving people. The current tax structure, instead of encouraging, discourages people to save money for long term.

Why do we pay taxes on the money that we are accumulating since last many years, and recently withdrew because of an emergency? Why can they let our money compound and form a huge fund instead of just taxing us. Sales tax makes sense, and so does flat tax and graduated tax. But how can the government explain such confiscatory tax system?

Instead, they can tax the amount of money that is withdrawn by people for expenditures. Why tax the entire income, even if a part of it is going into a financial instrument, which is being promoted by the government itself. Stop levying tax on savings.