Your Thanksgiving Dinner as Retirement Plan

I'd like to propose something a little out of the ordinary: before you sit down and enjoy your Thanksgiving meal, try imagining each dish is an element of your retirement strategy.

The turkey is your 401(k) account. If you're like most Americans, your 401(k) or other employer-sponsored retirement plan is the centerpiece of your saving efforts. Your plan anchors your retirement strategy because it's easy to contribute to and easy to receive the tax benefits. Plus, your employer may provide extras like advice service and auto-increases to contributions to help you maximize this benefit.

The potato dishes are your non-qualified investment accounts. Part of your retirement savings strategy could include money that will benefit you during retirement, but remains more liquid in case you need it sooner. Potatoes come mashed with gravy or cheese, roasted or baked. There's plenty of variation for that non-qualified money. It could be the money you're investing through a brokerage account without receiving any tax benefits. Compared with your 401(k), you may be slightly more aggressive or more conservative with this money. It's the money you plan to access sooner or a little later than your 401(k) funds. It's also the money you use case of emergency, since it's much easier to access because there are no penalties for early withdrawal.

The dressing is your property. No one wants to pay a mortgage or rent during retirement. Part of your retirement strategy may involve paying down your mortgage and upgrading your home so it requires less maintenance during retirement. You can live inexpensively in your paid-off, low-maintenance house or condo, and it's an investment you could later sell to fund a move to a retirement community. Like the dressing at Thanksgiving, investing in your property is a retirement strategy cornerstone.

The cranberries are annuities. They're a nice compliment to some of the other dishes, but you may decide not to load up on them. In retirement planning, an annuity is generally a more expensive option, but it provides some guarantees. People who diversify their portfolios may not need the guarantees that annuities offer, but these insurance products can really provide peace-of-mind. The bottom line is that paying higher expenses in exchange for sleeping soundly can still be a good investment.

The green bean casserole is long-term care insurance. It's an excellent supplement--a secondary dish if you will. But, it's still worth having if you expect to run out of other side dishes. Increased life expectancy means more and more Americans will need some kind of long-term care, and health insurance doesn't cover those services. If you hope to leave a legacy for your family--or simply avoid running out of money--this insurance can save your savings.

The pumpkin pie is an IRA. Pumpkin pie is a Thanksgiving tradition, and IRAs are a retirement planning staple. Still, both come in servings smaller than some of your other Thanksgiving favorites--in 2012 the maximum deductible IRA contribution is $5,000 with a catch-up contribution of $1,000 extra for investors who are 50 or older during this calendar year. But if you're too full--or earn too much money--you may have to skip the whipped cream and eat a little less pie. In other words, your income level and access to a 401(k) plan could prevent you from taking advantage of part or all of the deductibility that makes an IRA so appealing. But you can still make non-deductible contributions, regardless of income, that aren't subject to capital gains taxation. So everyone can enjoy at least a small slice.

I'm sure hungry now, and I'm looking forward to my meal on Thanksgiving.

Scott Holsopple is the president and CEO of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.



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