| It is important to make good choices when it | | | | There are technically five (5) types of IRA's: |
| comes to saving for your retirement. Having a | | | | Traditional IRA, Educational IRA, SEP IRA |
| Financial Planner or Accountant review your | | | | (simplified employee pension), Simple IRA and |
| current portfolio and your goals for the future is | | | | Roth IRA. |
| the first thing you should do; as they can help you | | | | A Traditional IRA grows tax-deferred, meaning |
| determine investment vehicles that align with your | | | | you do not pay taxes on any of the money |
| risk tolerance and savings objectives. | | | | growing within your account. Because you are |
| But where do you start? Which retirement plans | | | | funding your IRA with money that has already |
| should you focus on? What are the differences | | | | been taxed, you will only pay taxes on your |
| between the various retirement plans out there? | | | | investment gains as you take withdrawals. Some, |
| Many Advisors would agree; that if the company | | | | who qualify, may even be able to deduct their |
| you work for offers a 401(k) plan, a pension plan | | | | IRA contributions. |
| or a 403(b), you should take advantage of the | | | | A ROTH IRA is different from a Traditional IRA in |
| opportunity to enroll. Typically, employers make | | | | that your contributions grow tax-free. Meaning, |
| monetary contributions towards these plans and | | | | you do not have to pay tax on your investment |
| the internal fees associated with these types of | | | | gains even when taking them in the form of |
| accounts are usually lower than with individual | | | | withdrawals. Your contributions are also not |
| retirement plans. Because of these features, over | | | | deductible. If you choose a ROTH IRA, you must |
| time, it benefits you two-fold to put your money | | | | first open a traditional IRA, and then roll those |
| into them. | | | | monies into the ROTH account. |
| Though investing in an employer-sponsored plan | | | | College professors and teachers have a special |
| has its advantages, it has some disadvantages as | | | | retirement plan or pension called a 403(b). This |
| well. The investment options you have are usually | | | | plan is not tied to their specific employer and can |
| very limited. And more often than not, you are | | | | move with them as they transfer from school to |
| required to name a spouse or child as your | | | | school. If you're vested (meaning you have the |
| beneficiary. This being said, it is still an excellent | | | | right to keep all the money in the account) and |
| way to save and acquire for retirement, it just | | | | change schools or even careers, the amount in |
| shouldn't be your only investment vehicle. | | | | your 403(b) plan continues to grow tax-deferred. |
| With the current trends of changing careers | | | | If your retirement plan/pension includes stock |
| every 5 to 10 years, many of us will need to roll | | | | options (ability to purchase shares of company |
| our 401(k)'s long before we actually plan to retire. | | | | stock), or if your employer gives shares of stock |
| Transferring or "rolling" your employer-sponsored | | | | to your plan, you can keep them as the shares |
| retirement plan to a self-managed IRA may be | | | | will be in your name. You can also sell the shares |
| the best option for you. Keep in mind that some | | | | of stock for the going market rate. You have |
| companies will automatically cash out your | | | | two choices should you decide to keep your |
| retirement plan if the balance is under a certain | | | | shares of stock: you can continue to use your |
| amount. If this happens, they will be required to | | | | former employer as your housing agent, or you |
| hold back 20% for taxes, and you may get hit | | | | can roll the stocks into an IRA that you have |
| with a 10% penalty for withdrawing the cash | | | | opened with a brokerage firm. |
| before 59 ½ years old. Though generally, | | | | There are many choices and options for your |
| your former employer would simply perform a | | | | retirement investing. In addition to the research |
| direct transfer (called trustee-to-trustee | | | | and articles you will read on your own, it is still |
| exchange) to your IRA, incurring no penalties or | | | | always prudent to sit with a Financial Planner or |
| tax ramifications. | | | | Accountant to thoroughly review and assess your |
| A major benefit to IRA's (individual retirement | | | | current financial situation, to determine where you |
| account) is the tax break. Contributions to an IRA | | | | are now, and how to achieve your financial goals |
| reduce the income you need to pay taxes on at | | | | in the future. |
| the end of the year. At the same time you | | | | *** This article is intended for informational |
| receive this tax break, your money is also | | | | purposes only, and should not replace discussing |
| growing tax-deferred. (Meaning you do not have | | | | your individual needs with your local Insurance |
| to pay taxes on the growth as long as the | | | | Agent or Financial Representative. |
| money is not being withdrawn.) | | | | |