06 Aug Types of Retirement Plans
Thinking about retiring? It’s never too soon to plan ahead and pick a retirement plan. At Bank of the Lowcountry, we care about your future, so we’ve compiled a list of popular retirement plans. You want to pick the one that best suits your needs, so take your time reading over the four we’ve listed below.
In a pension plan, your employer sets aside money for you and invests that money on your behalf. The amount of contribution is based on how long you’ve worked for the company and your annual salary. With this plan, you don’t have to worry about choosing the right investments for your pension. The money becomes your income once you’re retired. You get to choose whether it’s lump sum or in regular annual payments.
401k / 403(b)
This is a defined contribution plan, meaning you’re responsible for funding the account. Your employer starts the plan, defines your eligibility, and outlines investment choice; however, you’re responsible for maintaining and contributing to the account. Your employer has the option to offer match funds. This plan excludes you from paying taxes, and contributions are automatically deducted from your paycheck each pay period.
IRA stands for an Individual Retirement Account and is defined contribution. With this plan, there’s no income tax, so your money and investment earnings grow tax-free. Also, there are more lenient rules for early withdrawals. However, eligibility to contribute phases out based on income. Tax savings are only offered if your tax rate is higher in retirement.
Traditional IRA is a tax-deferred retirement savings account that offers tax advantages, you pay taxes on your money only when you make withdrawals. Your tax-deductible may be full or partial depending on your income. For example, if you invest $5,000 annually into a Traditional IRA, you can claim a $5,000 tax deduction.
Prior to choosing a retirement plan, you should consult a tax or financial advisor for more information. If you have any more questions about possible retirement plans or would like to set up an account with us, contact Bank of the Lowcountry at (843) 549-2265.