Trying to find the right retirement plan can be as difficult as finding the right horse to bet on in the Kentucky Derby 2022. With many options to choose from, it can be hectic and somewhat confusing to know which ones work best.
Depending on your situation, one plan could help you out more than another. Below you can see which plan might be best for your personal needs.
These plans have been around since 1980 and still include some 401(k)’s (more on that later). In 2019 alone there were roughly 86 percent of Fortune 500 companies still offering these plans.
These plans slightly differ from traditional 401(k)’s and might offer something closer to pensions. Depending on the company you work for, this will potentially be more unique than other offers.
401(k)’s are a great tax advantage plan to help boost your retirement savings. Traditional 401(k)’s are for pre-tax earnings that are taxed after you withdraw them.
Roth 401(k)’s are after tax contributions, which means you do not get taxed on them when you are retired. The only downside is that you have to be over 59.5 years of age to take advantage of both opportunities to withdraw from them.
403(b) plans are very similar to 401(k)’s, but these are offered to school teachers or workers, various charities and other ventures. You would need to contribute pre-tax money and the income will grow tax free.
Once you are retired at 59.5 years of age, you can begin to withdraw them and it is treated as ordinary income. This plan is unique as it can only be offered by certain careers.
These plans are another similar offering like the 401(k). However, they are only offered to employees of state, local government, or for a variety of tax-exempt entities.
This plan mirrors the others mentioned, as you contribute pre-tax money and withdraw at a later date. The money grows tax-free and will be taxed as ordinary income at the time of withdrawal.
IRA’s are a great vehicle for your retirement and the two most popular are Traditional and Roth. You can only contribute $6,000 each year under 50 years of age.
Traditional IRA’s are similar to others mentioned above, meaning you have to contribute pre-tax dollars and will be taxed upon the withdrawal of them in retirement. The opposite is the Roth, which you contribute after tax dollars and will not be taxed upon withdrawal in retirement.
In some cases, you can roll over an IRA from a previous employer to another. These create tax advantages without having to disrupt your nest egg.
This plan is considered a defined benefit plan, which is arguably the easiest to manage. Pensions are fully supplied by certain employers that offer them and they give you a fixed amount of money each month during your retirement.
These are rare these days, as most companies are not supporting the idea anymore of funding a large amount of an account to lay you out for life. This number has dropped significantly by 59 percent since 1998.
Individuals can essentially create their own pensions these days by buying into these plans. If you know exactly when you want to retire, then this plan might work for you.
The only issue is, if you plan on working later in your life, this plan might not be worth it for you. The same advantages apply to after-tax contributions,so there are benefits in that regard.
This plan is similar to 401(k)’s but is a bit more aggressive. This is exclusive to government employees and uniformed servicemen and women.
These typically are fixed income and low cost investment options. In addition, it is one of the easier and simple investment options without having to think too hard about your retirement.
The investment grows by how much you plan to contribute. Obviously the more you invest with any plan the better off you will be.
