Retirement Accounts

Roth I.R.A Disadvantages

Contributions to a Roth IRA are NOT tax deductible. (which means you don't get any money back for these contributions) You can't contribute regardless of age if your single and your combined earned income is more than $129,000 Congress may change the rules that currently allow for tax free withdrawal of Roth IRA contributions.

Pension Plans Advantages

Guaranteed money at retirement. No fear of making the wrong investment decisions. Only have to put a small amount of money towards the plan. In some cases after a certain amount of time you don't have to contribute anymore. You can work after retirement and still collect your pension.

Traditional I.R.A Disadvantages

If you withdraw any money before you turn 59 ½ you are subject to a 10% penalty (on the amount withdrawn) and the remaining money gets taxed as regular income. If you are under age 50 you can ONLY contribute $5,500 per year to your I.R.A. If you contribute more than $5,500 you get a 6% penalty fee. After you turn 70 ½ you have to take a REQUIRED distribution each year.

401(K) Plan Disadvantages

It is difficult and expensive to access your 401(k) savings before age 59 ½ and they carry a 10% penalty for early withdrawal. 401(k) plans don't have the luxury of being insured by the (PBGC) which insures certain retirement plans incase the company goes under. You can only contribute $17,500 per year. The money the employer contributes does not become the property of the employee until a number of years have passed. Participants in a 401(k) plan face limited investment selections, they have to choose from what is available they can't pick something on their own. Required distributions at age 70 1/2

403(B) Plan Disadvantages

Limited investment choices (Like a 401k) 10% penalty on any money withdrawn before age 59 ½. Only offered to employees who work for a non-profit organization. Money can only be contributed through a salary reduction, you can't write a check and send it to your 403(b) account. Required distributions at age 70 ½ Not as likely that employer will match funds

Annuities Disadvantages

Not all annuities pay you a fixed rate of interest on your money, some rates are variable. The commissions you pay on annuities can be as high as 10% Withdrawals from an annuity made by individuals younger than age 59 ½ are subject to a 10% penalty by the IRS Most annuities charge a yearly fee that can be as high as 3% of the total value of your account.

Pension Plans Disadvantages

Reduced opportunity to make big money for your retirement. Limited investment selection All funds are held to retirement age. Almost impossible to access them before you retire. Limited Availability. Not many jobs offer this because they don't like to "Guarantee money". Usually only offered to state and city employees.

Annuities Advantages

There is no annual contribution limit for an annuity. This allows you to put away more money for retirement. All the money you invest compounds with interest year after year with no tax penalties. When you begin to withdraw money the account still receives compounded interest. Many people can set up a payment plan in which the annuity pays the investor a certain amount of money every month for the rest of their life.

Roth I.R.A

This Retirement plan id similar to a Traditional I.R.A, but has unique advantages that are not offered by a Traditional I.R.A, which is why you might find it to be a smarter choice.

Traditional I.R.A

This account is a is personal savings plan that give you tax advantages for setting aside money for retirement.

401(K) Plan

This plan is a type of tax-deferred compensation plan where an employee can elect to have the employer contribute a portion of his or her salary to the retirement plan.

403(B) Plan

This retirement plan is for employees of non-profit organizations (public schools and hospitals, museums, ministries etc.) These individual accounts are established and maintained by eligible employees.

Traditional I.R.A Advantages

•All contributions that you make to your account are tax deductible. •You are allowed to invest in stocks, bonds, and mutual funds with the money in your IRA account to help it grow. •All workers that are under the age of 71 ½ and have earned income are eligible for a Traditional I.R.A account. •You will not be taxed on the money you make with these investments each year.

403(B) Plan Advantages

•All contributions to the account are tax deductible. •Allows you to make annual contributions (like 401k plans), and allows them to grow tax-deferred until you withdraw them (upon retirement). •You are able to contribute up to $17,500 to your account per year. •You are eligible for employers to match funds.

Roth I.R.A Advantages

•All qualified withdrawals made from a Roth I.R.A are completely tax-free. •If you are under the age of 50 and have a combined income of $114,000 or less, you can contribute $5,500 to your account. •At age 70 ½, you are not subject to mandatory minimum distributions. This allows your account to continue growing. •You are able to take an early distribution if the money is going towards buying, building, or rebuilding a first home up to $10,000 maximum, or if you become disabled.

401(K) Plan Advantages

•The employees get to decide how much of their salary is contributed to the plan •Allows you to invest your money in stocks, bonds, mutual funds, and CD's. •Many employers will provide matching funds (putting in as much money into the fund as the employee does, up to a certain limit). •Your income is not taxed until you begin collecting this money after retirement.

Annuities

A financial product sold by insurance companies, designed to accept and grow funds from an individual and then pay out a stream of payments to the individual at a later point in time. Usually this takes place during retirement.

Defined Benefit Pension Plans

A plan that promises a specified monthly benefit at retirement. Usually an employee will get paid between 50% and 60 % of their final salary every year after they retire.