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You may have a retirement plan at work.
Consider these other options, too,
depending on whether you qualify:
IRA (Individual Retirement Account)
A regular IRA is also called a traditional IRA. It is a tax-deferred
retirement account. You may be allowed to make a tax-deferred contribution of
$3,000 in 2003 to a regular IRA. This account grows tax-deferred until you
begin to take distributions, which you can do after you turn age 59-1/2.
For persons who are age 50 or older, a special catch-up provision of the
new tax law allows them to contribute $3,500 in 2003. You are required to
begin taking distributions from a regular IRA every year after reaching
age 70-1/2 according to a schedule that is based on your life expectancy.
Roth IRA
A Roth IRA is a tax-advantaged retirement account that may allow you to make
an after-tax contribution of $3,000 in 2003. The annual contribution limit
increases to $4,000 in 2005; and $5,000 in 2008. If you keep a Roth IRA
for at least five years and are at least age 59-1/2 when you begin to
withdraw from the account, the entire account can be distributed tax-free.
A catch-up provision of the new law authorizes even higher limits for
workers who are age 50 or older. The yearly limit is $3,500 in 2003, and
increases to $4,500 in 2005, $5,000 in 2006, and $6,000 in 2008
ROTH vs IRA - which is right for me?
Roth IRA Calculators
Roth Conversions
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Sooner is better
than later
The best way to prepare for retirement is by combining the benefits of
compounding, consistent saving, reductions in taxable income and taking
advantage of tax-deferred growth.
Consider these other options if you or your spouse own or your spouse
works at a small business:
SEP
IRAs,
SIMPLE IRAs
Annuities
SEP IRA
A SEP plan is an employer-contribution retirement plan for self-employed
persons or small businesses (25 or fewer employees). SEP stands for Simplified
Employee Pension. Employers establish a SEP plan by opening individual accounts
called SEP-IRAs for each eligible employee. The maximum amount that can be
contributed to an employee's simplified employee pension (SEP) plan account is
the lesser of 25 percent of the employee's compensation for the year (up to
$210,000 considered in 2005 and $220,000 in 2006) or $44,000 in 2006 (formerly
$42,000 in 2005). The employer's annual contribution limit also includes any
elective contributions made by the employee under a salary reduction SEP (SARSEP).
SIMPLE Plan
A SIMPLE plan is an employer-contribution retirement plan for
self-employed persons or small businesses (100 or fewer employees.) SIMPLE is an
acronym for Savings Incentive Match Plan for Employees. Employers establish a
SIMPLE plan by either opening individual retirement accounts (SIMPLE-IRAs) or
401(k)-type accounts (SIMPLE 401(k)) for each eligible employee
Annuity
An annuity is a series of payments. For example, a monthly payment of
$1,000 for the next 120 months is a 10-year monthly annuity. Annuities are
frequently used in retirement planning because of tax advantages that they
offer. Insurance companies sell annuities contracts. A fixed annuity pays a
constant amount. A variable annuity pays a variable amount that fluctuates with
the investment performance of the underlying investments; and can also be used
strictly for accumulation. Those underlying
investments are called sub-accounts.
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