A
retirement
plan
is
to
provide
people
with
income,
or
pension,
during
retirement,
when
you
are
no
longer
earning
a
steady
income
from
employment.
Retirement
plans
can
be
set
up
by
employers,
the
government,
other
institutions
such
as a
union,
or
yourself.
Artists
need
to
plan
for
retirement
just
like
the
rest
of
us.
Artists
often
use
the
excuse
that
they
are
too
focused
on
their
acting
career
to
think
about
retirement.
Nothing
will
ruin
your
acting
ambitions
faster
than
financial
desperation.
It
is
possible
to
create
financial
security
and
independence,
while
simultaneously
and
aggressively
pursuing
acting.
Many
artists
are
independent
contractors
and
do
not
specifically
work
for
a
company,
therefore
they
are
not
offered
a
retirement
plan.
For
the
artists
that
belong
to
the
union,
they
offer
pension
programs.
For
the
artists
who
do
not
have
an
employer
pension
plan,
there
are
other
options
available.
An
Individual
Retirement
Account
(IRA)
is a
good
alternative.
An
IRA
is a
tax-advantaged
account
designed
to
help
you
save
for
retirement.
Below
is a
comparison
of a
person
who
is
saving
in a
pre-tax
account
versus
a
person
saving
money
in a
taxable
account.
1
|
Contributing to tax deferred account can help you increase your take home pay |
|
|
Pre-tax savings in the plan |
Saving in a taxable account outside of the plan |
|
Annual gross salary |
$50,000 |
$50,000 |
|
6 percent of pay before-tax contribution |
-3,000 |
0 |
|
Taxable pay |
47,000 |
50,000 |
|
Less a hypothetical 27 percent Federal income tax |
-12,690 |
-13,500 |
|
6 percent regular annual savings in a taxable account outside the plan (from gross salary) |
0 |
-3,000 |
|
Take home pay |
$34,310 |
$33,500 |
|
Annual difference in take home pay |
$810 |
|
It is
important
for the
Artist
to plan
for the
future.
While
you can
not
predict
everything
that
might
arise in
the
future,
when it
comes to
retirement,
the more
you
anticipate
and plan
for, the
better
off you
will be.
There
are
certain
challenges
that
every
Artist
will
need to
be aware
of. Some
challenges
are
inflation,
risk
tolerance,
and
investment
mix.
Inflation: Can
you
protect
the
purchasing
power of
your
savings?
In
mainstream
economics,
inflation
is a
rise in
the
general
level of
prices,
as
measured
against
some
baseline
of
purchasing
power.
In
investing,
inflation
risks
often
cause
investors
to take
on more
systematic
risk,
in order
to gain
returns
that
will
stay
ahead of
expected
inflation.
Inflation
is also
used as
an index
for cost
of
living
adjustments.
Inflation
erodes
your
purchasing
power in
retirement. You
have to
pay more
money to
receive
the same
goods
and
services. Some
of the
things
that
have the
highest
rates of
inflation
recently
are
things
retirees
consume
the most
of, like
health
care and
medicines.
When you
plan for
retirement,
you need
to plan
for
inflation. If
you
determine
you need
a
certain
amount
to live
on, you
need to
adjust
that
amount
for
expected
inflation. Historically
over
very
long
periods
of time,
inflation
has
averaged
about
3%.
Risk
tolerance:
In order
to plan
for
retirement
it is
imperative
to talk
about
risk
tolerance.
Risk
tolerance
refers
to your
willingness
to
endure
investment
volatility
and
possible
loss of
principle
while
waiting
for the
potential
growth
of your
investments.
The
higher
your
risk
tolerance
and the
longer
your
timeframe,
the more
weight
you may
want to
give to
securities.
On the
other
hand,
the
lower
your
risk
tolerance
and the
shorter
your
time
frame,
the more
you may
want to
rely on
short-term
investments.
Artists
tend not
to think
about or
have
knowledge
of
investment
risk. It
is a
necessity
to have
an
understanding
of risk
as it
relates
to your
portfolio.
Most
financial
websites
offer
tools to
assist
in
figuring
out your
investment
risk
tolerance.
Noticeably,
there
are
questionnaires
that
facilitate
what
category
you
belong
to. The
categories
start
with
conservative
all the
way to
the
other
end of
the
spectrum
to
aggressive.
The
categories
are
summaries
of how
the
investor
feels
about
investment
risk,
how much
downside
market
fluctuations
can be
tolerated,
and how
much
they
expect
to
profit
when the
markets
are
going
up.
Investment
mix: Will
your
savings
grow
quickly
enough
to
sustain
your
lifestyle?
Asset
Allocation
is
the ratio
of
stocks,
bonds
and cash
in a
portfolio. The
right
asset
mix
relative
to an
investor's
risk
tolerance
can generate
higher
returns,
while effectively
managing
risk and
help to
meet
your
goals. Having
a
diverse
allocation
of
assets
can help
you both
withstand
adverse
market
conditions
and may
increase
the
length
of time
your
assets
provide
you with
income.
However,
it will
not
ensure a
profit
or
guarantee
against
loss.
As an
artist
you need
to put
the
development
of a
retirement
income
plan at
the top
of your
to-do
list.
You need
to
consider
inflation,
risk
tolerance,
and
investment
mix
while
retirement
planning.
Retirement
is very
personal,
and
there is
no
perfect
formula
for all
individuals,
but the
more you
can save
with a
plan in
place,
the more
confidence
you will
have for
the
future.
Planning
may seem
challenging,
but it
is more
manageable
then you
think.
No
matter
how far
away you
are from
retirement,
it makes
good
financial
sense to
create a
long-term
retirement
strategy.
Every
decision
as an
Artist
you make
today
could
affect
how you
spend
your
retirement
in the
future.
On
average
Americans
are
living
longer
and
spending
more
time in
retirement.
Currently,
Stacey
L. Morin
works
for
Wilshire
Associates
Inc. in
their
Private
Equity
Division
as
Assistant
Controller
and
holds a
Masters
of
Business
Administration
in
Finance
from
California
State
University
Northridge
and
Bachelors
of
Business
Administration
in
Accounting
from
Eastern
Michigan
University.
Ms.
Morin is
a
Freelance
Business
Consultant
Writer
on the
side.
By
Stacey
L.
Morin,
MBA-Finance,
April
2008
|
