(ARA) – “What do I do now?” This is the question that is being asked by everyone from baby boomers on the cusp of retirement to 20-somethings who have just started their retirement savings. Today’s volatile market has left everyone in the dark.

“Challenging economic times call for a return to basic principles, like a commitment to personal savings, seeking professional advice to help investors assess their personal situations, and employing a holistic approach to retirement planning,” advises Christine Marcks, president of Prudential Retirement.

A thoughtful approach to preparing for retirement is important for all individuals, no matter how far off retirement might be. Prudential has developed “The Four Pillars of U.S. Retirement” as a framework to discuss how Americans can prepare for and live in retirement.

For most Americans, no single pillar will be sufficient to meet retirement income needs. Now more than ever, to save and plan effectively for a secure retirement, individuals should consider how Social Security, workplace-provided programs, personal savings, and retirement choices will affect their ability to live comfortably in the future.

Here are five back-to-basics tips to help Americans get their retirement plans back on track in this challenging market:

1. Know the options and outcomes for drawing your Social Security benefits.
If you are nearing retirement, be sure to understand your options and how you can maximize your Social Security benefits. Be clear about the tax implications of early or delayed benefits.

2. Continue to leverage and maximize your workplace-provided programs.
If you aren’t already, enroll in your workplace-sponsored defined contribution plan –401(k), 403(b), etc. — if one is available. You should contribute at least enough to get the full benefit of a sponsor match. This is not the time to “leave money on the table.”

Also consider in-plan investment options, such as target-date funds, automatic asset-allocation programs, and even guarantee-based vehicles that can protect savings and income and offer a guaranteed retirement paycheck.

3. Make the most of your personal savings.
Despite the uncertain economy, remain calm. Follow the basic principle of investment diversification, which continues to be an important element of any financial plan. Work with a financial adviser to appropriately allocate assets based on age, risk tolerance and years to retirement.

4. Assess — and maybe reassess — your retirement choices.
The current downturn may require you to re-examine key retirement choices, such as when to retire or where to live. A tax-efficient approach to taking retirement income can play a big part in how long your retirement assets will last. Understand the financial implications of your desired lifestyle and consider which choices make sense for your personal situation.

5. Seek advice from a financial professional.
If you don’t already have a financial adviser, a trusted friend or peer can be a good source for referrals. Schedule a time to have a conversation with a professional who can provide you with detailed advice about planning for your future retirement.

“Planning for retirement now by taking the back-to-basics approach is very important,” says Marcks. “In a down economy we must all take a realistic position on how different areas of our retirement are affected in order to have a bright financial future.”

Take the first step today and visit www.prudential.com.

Prudential Retirement is a Prudential Financial business. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company, Hartford, Conn., or its affiliates.

Courtesy of ARAcontent

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“When you look at retirement assets through a tax lens, it becomes clear that decisions regarding whether you have an appropriate level of guaranteed lifetime income, how to maximize Social Security, whether you should work in retirement and how you deploy your assets are very much linked,” says Robert Fishbein, vice president and corporate counsel for Prudential Financial. “You should consider all of these elements in a holistic manner because, ultimately, the goal is to make sure your assets support your desired standard of living for the rest of your life.” 

Here are Fishbein’s top tax considerations for those planning for retirement: 

1 — Personal income tax 
Most people assume their personal income taxes will be lower after retirement because they won’t be generating as much income and, therefore, will be in a lower tax bracket. But due to the recent economic downturn and losses in retirement assets, the dismal personal savings rate over the last decade — which has only just recently begun to rise — and the decline of traditional pension plans, and the increase in the full retirement age under Social Security for those born after 1954, many retirees are choosing to take on part-time jobs. 

Regardless of the reason for working in retirement, the income earned, combined with use of retirement savings, might create a situation where you will be taxed at the same level or an even higher rate than when you were working full time. Keeping this in mind, it’s important to have both taxable and non-taxable retirement assets upon which you can draw in retirement so that you can manage taxes and maximize your income in the long term. Talking with a financial advisor is the best way to create a custom plan that will help you maximize the number of years you can generate income to maintain the same standard of living you enjoy today. 

2 — State and local taxes 
There’s a reason, besides warm weather, that people retire in states like Florida and Texas. Where you retire can have a significant impact on your after-tax income because state and local taxes can affect how long your retirement savings will last. Florida and Texas have a state income tax rate of zero, so they are attractive to many retirees who want to maximize their retirement assets. California, on the other hand, has the highest state income tax; residents there are taxed at 9.3 percent. 

In addition to state income taxes, there are sales and property taxes to consider. Some states derive more of their revenue from these taxes than from income taxes. You should understand how all of the taxes in the state and town in which you plan to retire will affect your income. 

3 — Future tax rates 
Another thing to consider when figuring out your post-retirement income is how federal and state taxes might change in the future. It’s hard to predict whether they will remain the same, be lower or increase. A good indicator of future federal income taxes is to look at history and take an educated guess. Doing so suggests that rates are at historic lows right now, which likely means an increase in the near future. An indicator of future state taxes might be the current budget position of the state, which, at the moment, suggests that many states may be looking to increase their income, sales and/or property taxes in the short term. 

What does this mean for retirement planning — especially in those critical five year periods just before and just after retirement? Basically, if federal or state taxes go up, your retirement savings and assets will be depleted sooner. You will have to save more to make your money last longer or you will have to adjust some of your spending habits. 

As you look down the road for retirement, think ahead to how taxes will affect you. Visit www.retirementredzone.com to learn more about planning for retirement. 

Courtesy of ARAcontent

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