Learn about your retirement account options so you can be on track to retire! Don't wait until it's too late!

Retirement can be a difficult topic of conversation for some people. Many times, it is because they aren’t sure what accounts are available or where to start. As a result, they keep passing birthdays without getting started on their retirement goals!

Before I set out to learn more about retirement vehicles, I was in the dark too! I know what it feels like to get confused by all the different names and titles that people throw around.

Not anymore! I am here to clear up the air a little and help you get a handle on your retirement once and for all!

Download the reference guide and keep it somewhere handy!

{Please note: I am not a professional in the areas of retirement accounts. Please research all of the information yourself before making any decisions, or consult a tax professional.}

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401K

First up is the 401K. This is probably the most talked about account, as the majority of people that are employed have this account. This is an employer sponsored retirement account. You contribute to it with pre-tax money, and the money is taxed when it is withdrawn after the age of 59 ½. There is a yearly limit on contributions. If you are under 50, the limit for 2016 is $18,000.

The great thing about 401K’s is that employers will likely match your contribution up to a certain percentage. This can be a great deal of money, especially over time.

Let’s see an example of this. Your salary is $40,000. Your employer matches your contribution up to 5%. If you put in the full 5%, it would be $2,000/year (40,000*.05). That means that your employer would ALSO put in $2,000 year for you! And if you put in 0%? Ya, that means you don’t get any match from your employer. Bummer! Talk to your Human Resources representative to see if your company matches, and how much.

It is important to note that there is likely a vesting schedule. Some companies will have you vested a certain percent every year until you reach 100%, and other companies have you vested at 0% until a certain number of years, at which point you are vested at 100%. Rest assured that your contributions, and any earnings made from them, are always 100% owned by you. The vesting schedule is for the employer contributed money.

Roth IRA

The Roth IRA is one that I used to get confused with the Traditional IRA. A Roth IRA is an individual retirement account that is contributed to with after tax money. The money is not taxed when you withdraw it after age 59 ½. There is a yearly limit on a Roth IRA as well. In 2016, the limit is $5,500 for persons under 50. If you plan to contribute to both a Roth IRA and a Traditional IRA, the contribution limit if for both of these combined.

Anyone meeting the income requirements can contribute to a Roth IRA. You must make less than $194,000 if married filing jointly or $132,000 if single or filing separately.

This is a great option for people who are either not offered a 401K, or who want to increase their retirement savings above what their 401K or other account offers.

Traditional IRA

A Traditional IRA is very similar to a Roth IRA. The main difference between them is that the Traditional IRA contributions are made with pre-tax money. The money is taxed when you take it out, starting at age 59 ½. As said with the Roth IRA, the total contributions between the two can be no more than $5,500.

Traditional IRA’s are commonly used by individuals who are self-employed or people who are trying to max out all of their retirement account options. The income requirements for persons wanting to contribute are $194,000 if married filing jointly or $132,000 if single or filing separately.

There are many different companies that can help you with IRA’s. They range from full brokerage to hands-off. Ultimately, you need to choose which is right for you.

403B

A 403B is a tax sheltered annuity. In order to be eligible for a 403B, you need to be an employee of a public school, tax-exempt organization, or a minister.

In a 403B, the employer usually contributes to the account, with some exceptions. If the individual is contributing to it themselves, it can be either pre-tax or after tax. If you think you may be eligible for a 403B, talk to your Human Resources department or a tax professional

 

These are the four most common types of retirement accounts. Hopefully you now have a better understanding of them and which ones you should be utilizing.

Now, grab your FREE retirement accounts guide so you can reference it when planning your retirement! I suggest keeping it with your paperwork for retirement so you can look at it for a guide when you need to.

What retirement account do you use? Do you feel like you are on track for retirement?