Planning for Retirement

Learn about different retirement accounts and which one may be the best fit for you and your future.

Since retirement seems like a far-off goal to many of us, it can be hard to understand why it’s so important to begin planning now. But unless you plan on working until the day you die, it’s a good idea to get a plan together now so you can set yourself up in the future. 

The earlier you start planning, the better off you’ll be. That’s why Mary Rigg Neighborhood Center is here to give you the information you need to make informed decisions about your retirement. Keep reading to learn about different retirement accounts and which one may be the best fit for you and your future.

Retirement Account Options

To know how to create a roadmap for your future retirement, you’ll need to first have a general understanding of the common plan types. We’ve broken down a few below:

401(k) Plan

This is likely the retirement plan you’ve heard the most talk about, as many jobs offer this type. A 401(k) plan is a retirement savings account that allows an employee to save a portion of their paychecks for the future. It also comes with some cool tax benefits. 

Not only do a lot of employers hook you up with a 401(k) investment account, many will even match your retirement saving up to a certain amount. The term “match” means that some employers will contribute a certain amount of money to your retirement savings plan based on the amount you have saved.

Better yet, a 401(k) is a great option even if you don’t plan on staying at your current job forever. Once you quit your job offering a 401(k) plan, a few things could happen:

  • If you contributed less than $1,000 while you were with that employer, they would likely cut you a check for the amount so you can deposit it into another retirement account.  
  • If your contributions are between $1,000 and $5,000, that employer may move your money to an IRA (more on this below) of their choice.
  • If your contributions are above $5,000, that employer must leave your money in a 401(k) until instructed otherwise. 

If that employer offers a 401(k) match, you only get to keep all of that money if the contributions had fully vested before you left. “vesting “ is a term that means you don’t own something right away—it will become yours a little at a time. This means your employer will take back any unvested matched contributions. Don’t worry, though; everything you’ve saved yourself stays 100% yours.

Individual Retirement Account (IRA)

If you need to rollover your 401(k) plan into another account after leaving your job, an Individual Retirement Account is a great option. An IRA is an account set up by financial institutions that allows people to save for retirement and get tax benefits for doing so. 

When you do add money to an IRA, it has to be earned income that meets certain IRA rules. There are many different types of IRAs, with the most common being a traditional IRA. Anyone can open a traditional and it’s a good option for long-term retirement saving. In most cases, the money in your IRA won’t be taxed, you’ll only have to start paying taxes on it once you need to pull it out in your retirement.  

403(b) Plan

The 403(b) retirement plan is made for employees of public schools, tax-exempt organizations (like non-profits), and specific ministers. These plans have unique investment and tax benefits for many people, including, but not limited to librarians, government employees, doctors, nurses, professors, teachers, and school administrators.

The 403(b) has a lot of the same features as a 401(k) plan, but with some additional benefits. Many 403(b) plans vest funds in a shorter time period, and some allow for immediate vesting. This means that the money your employer matches will have a higher chance of becoming yours.

Do You Need Help Reviewing Your Options?

At first, this can all feel like a lot to wrap your head around. We get it! That’s why we offer financial coaches that can help you understand your options and make informed decisions about your future. You likely have enough on your plate, planning for retirement shouldn’t be something to stress about. Mary Rigg coaches make the process easy, and you’ll feel empowered by your ability to plan for the future and set your retired-self up for a comfortable life.

Connect with a Financial Coach Today!
Call 317-639-6106 extension 2