RETIREMENT
Choose from a variety of retirement savings options
The retirement savings options listed here are commonly considered during the retirement planning process. Each of these savings options is funded by a variety of investment choices — stocks, bonds, mutual funds, money market instruments, certificates of deposits and other securitized investment vehicles.
Company pension plans — To establish a company pension plan, your employer invests in a pension fund or trust for employees who met the requirements of the plan (i.e., age, years of service, full-time vs. part-time, etc.).
Simplified Employee Pension (SEP) — SEP plans are provided by sole proprietors or small businesses and corporations that have no other retirement plan.
Individual Retirement Arrangements (IRA) — An IRA is the most common form of tax-deferred retirement plan. It's personal rather than company-sponsored.
Deductibility of IRA contributions is limited for some taxpayers depending on their income and the availability of a pension plan at their work.
Traditional IRA — All or part of your IRA contribution is generally deductible from your taxable income, depending on your income level. Your contributions and earnings accumulate tax — free but are subject to taxation when they are withdrawn.
Roth IRA — With a Roth IRA, you receive no up-front tax deduction for annual contributions. But, if you meet the rules of the tax law, your contributions and earnings can be withdrawn tax-free. A Roth IRA can be started by a person of any age, as long as the person is otherwise eligible.
457 deferred compensation plans — These plans are available to employees of city or state governments. A 457 deferred compensation plan permits employees to defer taxes on both the income they invest and the earnings of their investment until some later date. 403(b) tax-deferred annuity If you work for a nonprofit organization, you may be able to earn retirement income from a 403(b) tax-deferred annuity. "Annuitants" receive the benefit of tax-deferred compounding for as long they keep their money invested in the annuity. Earnings are taxed at the annuitant's regular tax rate at the time of withdrawal. A Roth option may also be available. 401(k) plans Many businesses now offer 401(k) plans as the primary retirement savings option for their employees. Most companies match a portion of their employees' contribution to a 401(k) plan. No taxes are due on contributions and any investment earnings until funds are withdrawn from the plan. Some 401(k) plans now also offer a Roth option, referred to as a "Roth 401(k)." |
