Finding a retirement plan that is suitable for you can be stressing, considering that you probably take up most of your income in rent, insurance and bills and also because retirement is something way ahead in the future. But the sooner you start your retirement plan, the better.
Most companies will set up a 401(k) retirement fund with matching contribution benefit, but that is not the only option available. There are actually many other retirement plans and it is always a good idea to get familiar with them. This is your future income for when you retire to start living your golden years in a relaxed way.
1- Individual Retirement Account (IRA)
If you are under 70, you are eligible to open an IRA account. You can make regular deposits and it is really easy to start saving. The annual limit is $5,500 and you can start your IRA account with a bank, life insurance company or a mutual fund.
2- Roth IRA
It works just as the traditional IRA. The only difference is that you can make contributions after the age of 70 and you can even keep your money in the account. Also, Roth IRA plan has a higher tax break compared to the traditional IRA.
3- Simplified Employee Pension (SEP)
SEP plan is a variant of the traditional 401(k). Employees of any industry are eligible to set-up an account. You can contact your HR department to see if this option is available. Contributions to SEP Plan are only by employers, so there are no salary deferrals to avoid taxation. The contribution limit is 25% of your salary or $53,000.
4- Defined Benefit Plan
This plan provides a fixed retirement benefit. There are three different plan types so you need to check with your employer which is the one you get. You will get started automatically based on the number of years you work for your employer. It can only be distributed at the age of 62, though some employers have an early retirement option available.
Always check your options with the Human Resources Department of your company. They will provide you with all the information and guidance for you to get started. And keep in mind: a retirement fund is your investment for your own future!