Employer Retirement Accounts

Defined - Benefit Plans
Employee-sponsored defined-benefit plans are pensions that provide a guaranteed income for the rest of your life after you retire. The amount varies depending on your years of service with the company, your salary and your age at retirement. Traditional pensions are becoming a thing of the past.

Defined-Contribution Plans
Employee-sponsored defined-contribution plans don't guarantee a specific dollar amount at retirement. How much you receive depends on how much you and your employer contributed and how well your investments performed over the years.

The following are the most common defined-contribution plans:

401(k) plans offered by private companies gives a special tax break to employees saving for retirement. Your contributions are tax-deductible and your earnings are tax-deferred until you take the money out at retirement. The amounts that you and your employer can contribute are limited by law.

403(b) plans, offered by non-profit, tax-exempt employers, such as schools and colleges and hospitals, are Tax-Sheltered Annuity plans. A 403(b) plan lets employees defer some of their salary. This deferred money usually is not taxed by the federal government or by most state governments until distributed.

457 plans is a non-qualified, deferred compensation plan established by state and local governments and tax-exempt governments and tax-exempt employers. Eligible employees are allowed to make salary deferral contributions to the 457 plan. Earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan.

Simple IRA is a plan offered by businesses with no other retirement plans and with fewer than 100 employees. Your contributions and earnings are tax-deferred.

Individual Retirement Accounts

Traditional IRAs are a personal savings plan that gives you tax advantages for setting aside money for retirement. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances and amounts in your traditional IRA (including earnings and gains) are not taxed until distributed.

Roth IRA contributions are not tax-deductible. But, if you satisfy the requirements, qualified distributions are tax free upon withdrawal. Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live.

Timeline For Retirement

At age 50 Begin making catch-up contributions, an extra amount that those over 50 can add , to 401K and other retirement accounts.
At age 59 1/2 No more tax penalties on early withdrawals from retirement accounts, but leaving money in means more time for it to grow.
At 62 The minimum age to receive social security benefits, but delaying means a bigger monthly benefit.
At 65 Eligible for Medicare
At 66 Eligible for full social security benefits if born between 1943 and 1954.
At 67 Eligible for full social security benefits is born in 1960 or later.
At 70 1/2 Start taking minimum withdrawals from most retirement accounts by this age, otherwise, you may be charged heavy tax penalties in the future.