Planning for retirement should start during your working years, as early as possible. Whether you are a contracted employee, salaried employee, or are a business owner, the right retirement plan should be put in place.
Types of Retirement Plans
A well-crafted retirement plan will provide you with significant tax savings. The types of retirement plans vary, based on whether you are an employee, independent contractor, or business owner. The federal government has put several tax incentives in place to inspire workers to set aside money for retirement. The types of retirement plans include:
- 401(k): These are company-sponsored retirement plans that allow employees to contribute to a retirement plan. The company can match funds. The contributions made to the fund is pre-tax, reducing taxable income, but will be taxed when withdrawn from the fund.
- Roth 401(K): A Roth 401(k) involves contributions made with after-tax income, with the later withdrawals tax free.
- IRA: A traditional IRA allows you to contribute to a retirement fund pre-tax. You may be in a lower tax bracket after retirement, with savings.
- Roth IRA: These funds involve contributions after tax, with the fund growing over time tax free, along with tax-free withdrawals when you retire.
- SEP IRA: A SEP (Simplified Employee Pension Plan) can be established for employees, or by self-employed individuals. Only the employer contributes to these plans, making them a popular method for retirement planning for self-employed individuals.
- Simple IRA: These plans are for employees, and contributions may be matched by the employer or guaranteed but have lower contribution limits than some other plans.
- Solo 401(k): These retirement plans serve business owners who have no employees. The benefits include contribution limits higher than some other individual retirement plans.
Contact Thompson-Brooks Insurance today to get assistance with retirement planning strategies that suit your individual situation.