“If retiring and maintaining your lifestyle in retirement is your goal; then you probably need to contribute to a retirement account.” Retirement accounts are meant to supplement your Social Security or Pension income. I do retirement planning to ensure you’re on track for your retirement goals.
Employer Sponsored Plans
- Pension – Company or Government entity provides income or lump sum in the future
- 401(k) – Most common retirement plan set up by companies for their employees
- 403(b) – For non-profits, school districts, religious groups, and government organizations
- Traditional/Pre-tax – Save taxes now; pay taxes on withdrawals when you retire
- Advisable if you’re expected to retire in a lower tax bracket than your working years
- ROTH/After-tax – No tax savings now; tax free withdrawals when you retire
- Advisable if you’re expected to retire in a higher tax bracket than your working years
- Employer can provide optional contribution or matching features
- Investments are mostly into Mutual Funds
- Investments are limited to what the plan offers; typically 20-50 diversified Mutual Funds
- Annual employee contribution amounts are based on IRS guidelines for COMBINED Pre-tax and ROTH contributions
- Typically cannot withdrawal funds before age 59 ½ without incurring a 10% penalty
- Many other features and rules set by Employer, Department of Labor, and IRS
- IMPORTANT TO KNOW RETIREMENT PLAN DETAILS SO YOU CAN PLAN ACCORDINGLY
Individual Retirement Account (IRA)
- Traditional IRA – Pre-Tax: Save taxes now; pay taxes on withdrawals when you retire
- ROTH IRA – After-Tax: No tax savings now; tax free withdrawals when you retire
- Annual contribution amounts are based on IRS guidelines for COMBINED Pre-tax and ROTH contributions; phased out for high income workers
- Non-Deductible IRA – Allows high income earners to set aside money for retirement
- Investment Flexibility – Ability to choose from and use almost any type of investment
- Often used to consolidate plans upon retirement or switching companies
- Typically cannot withdrawal funds before age 59 ½ without incurring a 10% penalty
- Many other features and rules set by the IRS and state you’ll retire in
- IMPORTANT TO UNDERSTAND THE FEATURES AND RULES SO YOU CAN PLAN ACCORDINGLY