Retirement planning is the thought and commitment that you put into providing for income and a satisfactory lifestyle for your later years after you leaves the work force. Most people will spend an average of 25 years in retirement so careful planning is necessary for this to be a comfortable time.

When you reach retirement age, you will probably have in come from social security and possibly a pension but will that be enough? Will you continue to live in you present home or will you relocate? Do you want to travel? These and many more questions will need to be answered in you preparation for your retirement years.  http://www.retirement-financial-advisor.com/index.html

Retirement planning should begin as soon as you start your first job but most are too busy raising a family to think about something that far away.

It’s awfully hard to think about retirement when you’re wondering where to find the best day care for you infant. This is the time to look at your pension plan or 401(K) at work and have as much as you are allowed or can afford contributed each pay. As soon as you can, you should start investing a percentage of you pay for your retirement. These investments can be IRAs, mutual funds, stocks, bonds, money market, or other investment vehicles your broker might suggest. The secret is to make it a habit to invest regularly and not be tempted to use the money.

If you are older and just starting to think about your retirement, there are ways you can make up for lost time. Starting at a younger age gives you more time to accumulate money but with good investment strategies, you can sometimes manage to make enough for a comfortable retirement. Discuss your needs with a reputable broker and stick to your plan. http://www.retirement-financial-advisor.com/certified-retirement-financial-advisor.htm

Your retirement income will probably dictate where you will live and whether or not you can fulfill a dream of traveling. You might want or need to work well into your retirement years. More and more men and women are starting second careers after retiring from one job. The choice of when and how you retire is yours. Plan wisely.

Retirement plans play a crucial role in providing a source of income in our later years. We've all seen or heard about "the three-legged stool" that shows Social Security, our personal lifetime savings, and company retirement plans as the triad from which we will draw the funds to pay for our expenses after we retire.

These plans serve many purposes for employers and employees alike, and they come in many varieties. Yet few of us really understand the plans we have, despite the critical function they fulfill in our lives. To help increase that understanding, we offer this overview of those retirement plans that are most common. It also provides a few definitions along the way, too, to help clarify some of the terminology used in discussing these plans.

Qualified Retirement Plan. A qualified retirement plan is one that meets the numerous requirements of the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA). Plans meeting these requirements qualify for four important tax benefits.

First, employers may deduct allowable contributions in the year they were made on behalf of plan participants. Second, plan participants may exclude contributions and all earnings thereon from their taxable income until the year they are withdrawn. Third, earnings on the funds held by the plan's trust are not taxed to that trust. And fourth, many times participants and/or beneficiaries may further delay taxation on a plan's benefits by transferring those amounts into another tax-deferred vehicle such as an Individual Retirement Arrangement (IRA).

A qualified retirement plan falls into one of three general categories: A defined benefit plan, a defined contribution plan, or a hybrid plan. A hybrid plan is one that combines various attributes of the first two categories, which are discussed below.

Nonqualified Retirement Plan. A nonqualified retirement plan is one that does not meet the requirements of the IRC or ERISA. These plans may be discriminatory in their application and are typically used to provide deferred compensation to key personnel. Because these plans allow a broader flexibility to the employer, they do not receive the same favorable tax treatment as that permitted qualified plans. Employers receive no tax deduction until the employee receives proceeds from the plan. Except for a governmental 457 plan as discussed later, on receipt, the proceeds of a nonqualified plan are taxed to the employees and are ineligible for transfer to an IRA. In some situations the employee may face immediate taxation on the benefit even when the funds will not be received until much later in the future.

Defined Benefit Plan. A defined benefit plan is the traditional company pension plan. It is so called because the ultimate retirement benefit is definite and determinable as a dollar amount or as a percentage of wages. To determine these amounts, defined benefit plans usually base the benefit calculation on a combination of years of employment, wages, and/or age. These plans are funded entirely by the employer, and the responsibility for the payment of the benefit and all risk on monies invested to fund that benefit rests with the employer.

Benefits typically are not payable until normal retirement age and usually are paid in the form of a lifetime annuity. Nevertheless, a large minority of plans permits lump sum payments at retirement. Monies received as a lifetime annuity will be taxed at ordinary income tax rates and are ineligible for rollover to an IRA. Lump sum payments may be transferred to an IRA to defer immediate taxation. On transfer to an IRA, the proceeds are subject to IRA rules and regulations.

Five-year forward income averaging for lump sum payments was eliminated as of January 1, 2000. However, persons born December 31, 1936 or earlier retain the option to use 10-year forward averaging based on 1986 tax rates and to use the 20% long-term capital gains rate on benefits attributable to service prior to 1974.

Under normal circumstances you may not take money from a retirement plan free of an early withdrawal penalty unless you are age 59 1/2. But that's not always true. If you leave your job in the year you reach age 55, you may take your qualified retirement plan benefits from that job free of any early withdrawal penalty. You must, though, pay ordinary income taxes on any money not transferred to a traditional IRA.

People younger than 55 who receive qualified retirement plan benefits as income in a form other than a lifetime annuity are subject to an excise tax based on a premature distribution from that plan. The excise tax will continue until the retiree reaches age 59 1/2. If you're in this unfortunate camp, you'll be taxed on that benefit at ordinary rates and will be assessed an additional 10% of that sum as an early distribution penalty as well. Care to rethink that plan about retiring at age 50?

Defined Contribution Plan. A defined contribution plan is a qualified retirement plan in which the contribution is defined, but the ultimate benefit to be paid is not. In such plans, each participant has an individual account. The benefit at retirement depends on the amounts contributed and on the investment performance of that account through the years. In such plans, the investment risk may rest solely with the employee because of the opportunity to choose from a number of investment options. These plans take many forms and are known by various names such as money purchase, profit sharing, 401(k), or 403(b) plans.

In 2002, the maximum contribution to a defined contribution plan increased to the lesser of 100% of compensation or $40,000. The maximum dollar amount will be adjusted upward for inflation in later years by $1,000 increments whenever cumulative inflation causes the limit to exceed the next higher $1,000.

At retirement, defined contribution plan benefits are typically paid in installments or as a lump sum; however, they may also be paid as an annuity. Income tax ramifications and rollover options are the same as those described above for defined benefit plans. Installment payments for a period of less than 10 years are eligible for transfer to an IRA, while those lasting for a period of 10 years or more are not.

In 2002 and later, increased portability will exist between various types of contributory plans. That's because transfers will be allowed between IRAs, 401(k), 403(b), and 457 plans

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