Where will your retirement money come from? If you are like most people, qualified-retirement plans, social security, and personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement-income sources.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
A qualified retirement account for individuals. Contributions to a Traditional IRA may be fully or partially deductible, depending on your individual circumstances. Distributions from Traditional IRAs and most other employer-sponsored retirement plans ae taxed as ordinary income and, if taken before age 59-l/2, may be subject to a 10% Federal income tax penalty. Generally, once you reach 70-l/2, you must begin taking required minimum distributions.
A qualified retirement plan in which earnings grow tax deferred and distributions are tax free. Contributions to a Roth IRA ae generally not deductible for tax purposes, and there are income and contributions limits. Roth IRA contributions cannot be made by taxpayers with high incomes. To qualify for a tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59-l/2. Tax-free and penalty-free withdrawals also can be taken under certain other circumstances, such as after the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals at 70-l/2 as required with a Traditional IRA.
myRA RETIREMENT SAVINGS ACCOUNTS
In 2014, the Treasury Department introduced a new savings program for taxpayers that do not have access to an employer sponsored retirement savings plan or for those that want to supplement their existing plan. The my Retirement Account (myRA) is a Roth IRA account and has the same tax treatment rules. A myRA can be opened with $25 and there are no fees for the services. The account must be funded by a direct deposit through an employer. Taxpayers determine the amount of contributions direct deposited from each paycheck into their myRA.
SIMPLE IRA PLANS
Qualified employers (including self-employed individuals) may establish savings incentive match plans for employees (SIMPLE) retirement plans. A SIMPLE plan allows eligible employees to defer taxable compensation and employers to make either matching contributions for employees who elect to participate, or non-elective contributions for all eligible employees (including those who do not elect to participate).
SIMPLIFIED EMPLOYEE PENSIONS (SEPs)
A SEP is a written arrangement that allows an employer to make contributions to a traditional IRA (SEP IRA) for each eligible employee. The limits on employer contributions to a SEP IRA are generally higher than the limits on IRA contributions by individuals. SEPs are often used by self-employed individuals because they have the same contribution limits as profit sharing plans but none of the complex (and costly) compliance and reporting rules applicable to qualified retirement plans.
A qualified retirement plan available to eligible employees of companies. 401(k) plans allow eligible employees to defer taxation on a specific percentage of their income that is to be put toward retirement savings; taxes on this deferred income and on any earnings the account generates are deferred until the funds are withdrawn—normally in retirement. Employers may match part or all of the employee’s contributions. Employees may be responsible for investment selections and enjoy the direct tax savings.
RETIREMENT PLANNING WITH ANNUITIES
Being prepared for retirement isn’t about saving, it’s also about generating an ongoing income so you can retire with Confidence.
FOR THOSE SAVING FOR RETIREMENT
Deferred annuities either fixed for variable, provide TAX-DEFFERED growth potential, helping you save more for retirement.
Questions to ask when considering an annuity:
- Would I feel safer in retirement if I had insurance against certain financial risks like running out money?
- How can I make sure I buy the right annuity for my particular needs?
- How can I make sure I buy an annuity that doesn’t cost too much?