Retirement Savings Accounts
Learn how and where to save to fund your retirement. Use 401(k)s, traditional and Roth IRAs, HSAs, and other tax-advantaged accounts strategically and set the financial goals you need to establish your future.
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Research says you need to save roughly 15% of your annual salary—but if you wait until you’re older to save, you will need to save more. The goal: to have an income that’s 75% to 80% of what you brought in the year before you retired.
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You’ll need to scale back, downsize, and possibly continue working part-time. Taking a roommate may help—and a reverse mortgage is an option if you own your home.
Learn More: Retirement Without Savings? -
Just start—and take advantage of employer-based matching funds in your 401(k) if you have one. If not, consider a Roth IRA if you qualify, or a traditional IRA if you want the tax deduction. Brokerage firms have many options to explore.
Learn More: Starting a Retirement Fund: How To Start Saving -
You can contribute to your Health Savings Account until you start taking Medicare and take tax-free withdrawals to pay qualified medical expenses. This is better than 401(k) and traditional IRA distributions, which are taxable.
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Public-sector and not-for-profit organizations cannot offer 401(k) plans. A 403(b) plan is typically offered to employees of private nonprofits and government workers, including public-school employees. There are two different types of 457 plans—the 457(b) to state and local government employees and the 457(f) to top executives at nonprofits.
Learn More: 457 Plan vs. 403(b) Plan -
Even $1 million requires smart budgeting. Retirees will probably do better and have more flexibility if they invest in a traditional portfolio and take yearly withdrawals rather than buy an annuity.
Learn More: This Is How Retirees Live on $1 Million
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Profit-Sharing Plan
This plan lets employees share in company profits based on quarterly or annual earnings. The company makes contributions to the plan; employees cannot.
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Rule 72(t)
This allows account holders to take early penalty-free withdrawals from IRAs and other tax-advantaged retirement accounts according to specific rules.
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Deferred Compensation
These plans allow employees to defer compensation—and the taxes due on them—until they retire. There are qualified plans, such as 401(k)s and non-qualified plans, which some companies make available to highly compensated employees.
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Non-Qualified Plan
These are tax-deferred, employer-sponsored retirement plans that fall outside of ERISA guidelines and are offered to key employees and others, often as a recruitment or retention tool. There are four types.
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Qualified Retirement Plan
These retirement plans meet IRS requirements and include 401(k)s and 403(b)s. Both employers and employees get tax benefits for offering and contributing to these plans.
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Cliff Vesting
This practice gives employees the right to receive full benefits from their company’s retirement plan at a specified date, often after five years, rather than becoming vested gradually over a period of time. It applies to both qualified retirement plans and pension plans.
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Pretax Contribution
A pretax contribution is any contribution made to a designated pension plan, retirement account, or another tax-deferred investment vehicle for which the contribution is made before federal and municipal taxes are deducted.