A wide variety of retirement planning options can meet your projected needs. Some are funded by your employer, others are funded by you. Keep in mind that in most cases, withdrawals made before age 59 1/2 are subject to a 10 percent penalty, and withdrawals in most cases must begin by April 1 of the year after you turn age 70 1/2.
Income taxes are also due upon withdrawal in most cases. This list describes 10 of the most common options available to you.
Defined benefit pension: provides a specific monthly benefit from the time you retire until you die. This monthly benefit is often a percentage of your final salary multiplied by the number of years you’ve been with the company. Defined benefit pensions are funded completely by your employer.
Money purchase pension: provides either a lump-sum payment or a series of monthly payments. The benefit size depends on the size of the contributions to the plan. The employer funds money purchase pension plans, although some do allow employee contributions.
Profit-sharing plan: employer funded from comanpy profits; employee contributions are usually optional. You will normally receive this benefit as a lump sum. The company’s contributions — and thus your retirement benefit — may depend on the company’s profits. If a profit-sharing plan is set up as a 401(k) plan, additional employee contributions may be tax deductible.
Savings plan: provides a lump-sum payment at your retirement. You, the employee, fund savings plans although employers may also contribute. If a savings plan is set up as a 401(k) plan, employee contributions may be tax deductible.
Employee stock ownership plan (ESOP): a plan where the employer periodically contributes company stock toward an employee’s retirement plan. Employee stock ownership plans may provide a single payment of stock shares at retirement. Upon reaching age 55, with 10 or more years of plan participation, you have the option of diversifying your ESOP account up to 25 percent of the value. This continues until age 60, at which time you have a one-time option to diversify up to 50 percent of the account.
Tax-sheltered annuities or 403(b) plans: these plans are offered by tax-exempt and educational organizations. When retiring, employees have a choice of a lump sum or a series of monthly payments. These plans are funded by tax deductible employee contributions.
Individual retirement account or IRA: available to nearly every wage earner at any salary and are funded only by individual contributions. IRAs are held in an account with a bank, brokerage firm, insurance company, mutual fund company, credit union, or savings association. They will provide either a lump-sum payment or periodic withdrawals upon retirement and come in two basic types of IRAs: traditional and Roth. Contributions to traditional IRAs may be tax deductible and are taxed upon withdrawal, whereas contributions to Roth IRAs are not tax deductible but qualified withdrawals are tax-free.
Keogh plans: specifically designed for self-employed people. They are funded by wage-earner contributions and provide either a lump-sum payment or periodic withdrawals upon retirement. Keogh plans have the same investment opportunities as IRAs and the contributions are tax deductible within certain limitations.
Simplified employee pensions: are designed for small businesses. Like IRAs, they provide either a lump-sum payment or periodic withdrawals upon retirement. Unlike an IRA, the employer is the primary contributor, although some simplified employee pensions do allow employee contributions. SEPs are usually held in the same types of accounts that hold IRAs.
Savings Incentive Match Plans for Employees: these SIMPLE plans are designed for small businesses. They can be set up either as IRAs or as deferred arrangements such as 401(k)s. The employee funds them on a pre-tax basis, and employers make matching contributions. Principal and interest grow tax deferred.
Roger Sorensen
America's Financial Guide can be found at ==>http://www.Slave2Work.com Subscribe to Money Basics via http://www.slave2work.com/ezine.html
Slave2Work.com - Are you ready for financial freedom?
[tags]retirement planning,financial planning,wealth building,retirement tips,retirement finances[/tags]
ไม่มีความคิดเห็น:
แสดงความคิดเห็น