What Retirement Planning Tools Are Available to Me?

Each of us has our own goals as to how much we would like to have set aside for retirement.  There are a variety of retirement plans available.  Some are sponsored by employers and others are more individual.

Employer-sponsored plans include:

1. 401(k) plans are offered by employers to their employees.  401(k) plans allow you to withhold from your wages tax-deferred income for use when you retire.  Sometimes your employer will match your contribution.  If you take part of your 401(k) funds before a certain age, you will have to pay a penalty tax.
2. 403(b) plans are like 401(k)’s but are offered by hospitals, colleges and other non profit organizations.  Penalties will apply for early withdrawals from a 403(b) plan.
3. 457 plans are like 401(k)’s but are offered to workers in state and federal governmental agencies, but are never matched.
4. Simplified Employee Pension (SEP/SARSEP) plans are for small business where the employer opens an IRA account and makes deposits for themselves and their employees.
5. Pension plans are retirement plans set up by the employer where the employer makes all of the contributions.

Individual plans include:

1. Individual Retirement Accounts (IRA) allow a person to save up to $4,000 per year and defer all taxes on the interest until you begin withdrawing money at age 59 ½ or older.
2. Roth IRAs are where you deposit after-tax dollars, which grow tax free.  When you make withdrawals, you do not pay any taxes.
3. Keogh Plans are for self-employed people where you can make tax-defereed contributions.
4. Social Security is available to all those who have worked during their lives.  Each year you should receive a statement from the Social Security Administration showing you what you should receive when you retire.