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401k
This type of vehicle allows an employee to contribute before tax dollars into a tax deferred retirement account to supplement income in an individual's retirement years. A predetermined portion of a worker's salary can be deducted before tax by the employer and contributed to the plan. The plan will have certain investment options geared from very conservative, to more aggressive. How each participant is based on an individual's risk tolerance and gear towards specific investment goals. The more conservative of these options is usually a money market/savings account, and range to more aggressive options like equity mutual funds and stocks.
In some instances, an employer will "match" an employee's contributions up to a certain percentage. A match is a nice benefit to have which allows employees 401k accounts to grow as they continue your contributions.
A 401k is just one type of retirement vehicle that is used by employers in order to provide its workers a tax deferred plan for retirement. These plans carry a number of benefits that include but not limited to "post tax contribution options" (Roth options), loan features, and higher contribution limits.
Annuities
One of the most recognized and stated fears our retirees experience today is the fear of outliving their retirement income. The term annuity has carried some negative connotation in recent years due to the misconception of how one actually works, and also the misunderstanding of what types of contracts are most suitable for specific goals.
Just like life insurance, there are a number of different types of annuities that one can be provided in order to achieve specific financial objectives. It is imperative, that if someone is ever pondering the thought of an annuity having potential value in one's retirement portfolio, they must be educated on a number of things before making a decision.
Some of these key points:
How does this contract fit into my retirement plan? Is my cash value accessible within the contract? Are there any surrender penalties or stipulations with early withdraw? What contracts have the highest payouts? What are the fees involved? How many types of annuities are there? Are all contracts susceptible to market performance or are there a number of options?
Traditional IRA
An IRA stands for Individual Retirement Account. An IRA is another investment tool that is used to provide money for retirement. Contributions to these accounts grow tax deferred, and may also have a tax benefit for income purposes. Traditional IRAs will allow participants to contribute annually to their account for retirement. Just like a 401k, the money in this account will be taxed upon withdraw, meaning that any dollar that is taken from the IRA will count towards an individual's income for that year. Money is able to be drawn at any time if need be, but in most cases there is a 10% IRA penalty for early withdraw before 59.5 years of age.
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Request to start an IRA
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Have an IRA and it's not being managed? We would love to help in being the agent of record to ensure you have a point of representation as well as active management on your funds. An annual review of your investment goals as well as performance are key in managing production.
Contact us today for a no obligation review!
Roth IRA
A Roth IRA is similar to the traditional IRA in nature, but is a post-tax funding vehicle unlike the traditional IRA that is pretax. The contributions to a Roth IRA are put into the account "after" the money has been taxed. The contributions will still have the advantage of growing tax deferred, but when withdrawn for income on retirement, there will be 0 income tax on those withdraws. It is a positive feature to have the addition of a Roth IRA in your portfolio in order to lower the unknown tax burden when pulling retirement income. The contribution limits vary as well as early withdrawal of gains.