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Investment Goals Change in Retirement

Radio Transcript, 2 minutes 25 seconds, for use during week of March 3.

Description: Penny and Susan discuss IRAs, investment portfolios and planning for retirement

Announcer: Invest Wisely comes to you from Iowa State University Extension through a grant from the Investor Protection trust, providing investor education on the web at: investorprotection.org.

Susan: Penny, last time we met we talked about my employer’s pension plan.  I also have an Individual Retirement Account and a few additional investments.  When can I start withdrawing from my IRA?

Penny: If you have a traditional IRA, you can begin taking money out at age fifty-nine and a half with no early withdrawal penalty. You’ll pay taxes on all of the amount you remove unless it’s a nondeductible IRA.  With non-deductible IRAs, you can’t  take an income tax deduction--your contributions are with after-tax dollars.  So when you withdraw from one of these IRAs , you’ll pay tax only on the account earnings that are withdrawn. 

Susan: If I don’t need the money right away, can I simply leave it and let it continue to grow?

Penny: You can wait until you are age 70 ½ but then you’ll have to begin taking a minimum required distribution from your traditional IRA.  If you have a Roth IRA rather than a traditional IRA, there is no minimum distribution requirement during your lifetime and there’s no tax on withdrawals.

Susan: I also have a few individual investments.  What do I need to think about with those investments as I’m planning my retirement?

Penny: You’ll find that investing during retirement is a little different than investing for retirement.  Specifically, your investment goals will change.

Susan: I know I’ll be thinking about hanging on to what I’ve saved once I retire.

Penny: Yes.  When you invest for retirement, you may be somewhat more aggressive, investing in a growth mutual fund, for example, because you have time to ride out the ups and downs in the market.  But in retirement, you’re usually more concerned with ensuring that you’ll have money available when you need it.

Susan: And that the funds I have will last.

Penny: Exactly.  However, you also want to invest at least some of your portfolio with growth in mind.  Investing too conservatively may make it hard for you to keep up with inflation.

Susan: Thanks, Penny.  You’ve been really helpful again.

Penny: You’re welcome.  And remember, for more information visit the ISU Extension website at extension.iastate.edu and look for ‘Invest Wisely.’

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Updated February 25, 2008