Retirement Funding and Employment
When you are saving money for retirement, you must have a good idea of your options. Employer-sponsored retirement plans often help you fund your retirement. However, some retirement plans are not tied to employers. These plans are individual plans that allow you to take your savings with you, regardless of where you work.
Other People Are Reading
-
401k plans
-
401k plans are retirement plans that require you to be employed in order to participate in the plan. 401k plans establish a retirement account through your employer. You contribute to the plan through paycheck deductions. Your employer may also contribute to the plan, though this is not required. Your contributed funds may be deposited either pretax (for traditional 401k plans) or after-tax (for Roth 401k plans).
IRAs
-
IRAs are Individual Retirement Accounts. They may be employer sponsored or separate from your employer. An employer-sponsored retirement IRA is a SEP or SIMPLE IRA. Traditional and Roth IRAs are not connected to your employer. With SIMPLE and SEP IRAs, you contribute money on a pretax basis. Traditional IRAs are tax deductible. The money comes from your paycheck with a SEP and SIMPLE, and after your pay for a traditional IRA.
Roth IRAs only accept after-tax contributions. These contributions are made from your bank account into your Roth IRA. Not deduction is allowed.
-
Annuities
-
Annuities are insurance policies designed to help you save money for retirement. An annuity is funded with after-tax dollars. You can fund your annuity via checks or the insurer may set up a monthly draft deposit.
Considerations
-
Before making a decision about which retirement plan to choose, consider your financial goals. Funding your retirement through your employer means that you will be able to fund your plan directly from your paycheck. However, with Roth IRAs, you receive a tax benefit during retirement that is not available with an employer-sponsored plan. Roth accounts are tax-free during retirement. If this is important to you, then you won't want an employer sponsored plan.
With all 401k and IRA plans, there are limits to the amount of money that can be contributed. With an annuity, there are no limits. If you need a retirement plan without any limits on contributions and you want the option to convert your retirement savings to a guaranteed monthly income, an annuity would be the most ideal solution for you.
-
