Retirement Planning

Basic Understanding of Retirement Plans

Does the mention of retirement leave you confused? Understand what options you have for retirement savings by reading this overview. It can help you determine which plan is right for you.

5 Essential Plans For Retirement

Does the very mention of retirement planning have you scratching your head and wondering what to do next? Worse, is it preventing you from getting your retirement plan started?

Don't let fear of the unknown stand in the way of your retirement planning efforts. Begin by getting a basic understanding of the various essential retirement plans that are available to you.

Traditional IRA Definition.

An IRA is a retirement account in which you can contribute a limited amount into each year to supplement your retirement savings. If you qualify, your contributions can be made on a pretax basis, meaning your taxable income would be lowered by the amount that you contribute. You can establish an IRA at a bank, a brokerage house, or any other qualified financial institution. Because IRAs are intended for retirement savings, if you withdraw the money before age 59½ you will owe income taxes on the distribution and may be subject to a 10% federal tax penalty.

Benefits of Roth IRA.

Unlike a traditional IRA, a Roth IRA lets you invest after tax dollars, and as long as you meet certain conditions, the money generated within the Roth is typically non-taxable. This means that you won't pay any additional taxes when you withdraw your money if you have met the conditions for qualified distributions. If your employer doesn't offer a 401k plan, a Roth is a great way to save for retirement.

The 401(k).

A 401(k) is a retirement account that's typically offered as a benefit to employees by an employer. It allows you to contribute a portion of your pre-taxed earnings into a tax-deferred account. It reduces the amount of income that your taxes are based on, and any investment gains grow tax deferred.

What is a SEP IRA?

A SEP IRA is a retirement plan designed to benefit self-employed individuals and small business owners. A SEP IRA allows you to contribute a portion of your income to your own retirement account, fully deducting them from your income taxes. The maximum annual contribution limits are often higher than most other tax-favored retirement accounts.

Simple IRA Plan.

Also known as a Savings Incentive Match for Employees IRA, a Simple IRA is a plan that small businesses can offer to employees. Working much like a 401(k), contributions are made from pretax paycheck withdrawals, and any gains grow tax deferred.

These are just five of the most common retirement plans available, and most can be opened at any bank, brokerage house, or other qualified financial institution. Keep in mind that there are several other types of retirement accounts that you might want to look into before making a decision. As always, consult with a financial professional to discuss the various guidelines of each plan.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

 

Retirement Plans

Creating the ideal retirement plan isn't easy. In fact, it can often be a confusing process. But instead of letting your fear get the best of you, why not brush up on some retirement planning basics? Begin by learning more about some of the most common retirement plans available, so you don't put off building that nest egg another day. For more information, visit our learning center.

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