Making Sense of Retirement Planning
Plans similar to a 401(k) include a 403(b), offered by nonprofit organizations such as hospitals, schools and religious organizations and a 457(b), which is exclusive to government employees. Whatever the case may be, if your employer offers you a chance to save directly, take it. It’s one of the easiest ways to prepare for retirement.
If your company doesn’t offer a retirement plan, or if you’d like to put away even more for retirement, an IRA is the next option to consider. Currently, you can save up to $4,000 each year in an IRA. (If you’re over 50, you can make extra catch-up contributions of up to $1,000.) There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; a Roth IRA, by contrast, doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals.
If you are offered a retirement-savings plan through your workplace, begin using it. If not, ask a financial advisor to set up the IRA that works best for you. You’ll be surprised how easy it is to get started once you understand your options.
Savings plans will set you up for living expenses, but what about health care as you age? Most health insurance doesn’t cover custodial (nursing-home) care. Accounting for this in your initial retirement plan will make things less burdensome for you and your family.