Retirement planning is more than just saving—it’s about understanding your options, managing risks, and securing a steady income for your future. Whether you’re just starting or nearing retirement, now is the time to learn how thoughtful planning can preserve your wealth, reduce taxes, and provide peace of mind for years to come.

• Tax deferral can help your money grow.
• Take full advantage of 401(k)s and other employer-sponsored retirement plans.
• Contribute to a traditional or Roth IRA if you qualify.

IRAs

• Traditional IRAs and Roth IRAS
• You can contribute up to $5,500 (2024)
• Individuals age 50 or older can make an additional “catch-up” contribution of $1,000
• Tax-advantaged features
• Wide range of investment options

Traditional IRA

• Must have taxable compensation and be under the age of 70½
• Contributions deductible?
  Depends on:
  • Whether an employer-sponsored retirement plan covers you
  • Income and filing status
• Funds grow tax-deferred.
• Distributions subject to federal income tax
• Generally, distributions made before age 59½ are subject to an additional 10% premature distribution tax.

Roth IRAs

• The ability to contribute depends on income and filing status.
• All contributions are after tax (no deduction).
• Funds grow tax deferred
• Qualified distributions are federal income tax-free.
• 5-year holding requirement, and
  • Age 59½
  • Disability
  • First-time homebuyer expenses
• Nonqualified distributions– the federal income tax and 10% premature distribution tax may apply to the earnings portion

If you can do both, should you make deductible contributions to a traditional IRA or contribute to a Roth IRA?

Roth IRA may make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries

Traditional IRA may make more sense if you want to lower your tax bill while you’re still working and you expect to be in a lower tax bracket when you retire

401(k) Plans–Pretax contributions

• Defer up to $18,000 of compensation (2024)
• Individuals age 50 or older can make additional “catch-up” contributions of $6,000 (2024)
• Funds grow tax deferred until withdrawn
• Employer “match” is free money
• Limited to investment options offered by the plan
• Distributions made before age 59½ (age 55 in some circumstances) are subject to an additional 10% premature distribution tax

401(k) Plan–Roth Contributions

• Contributions are after tax
• Funds grow tax deferred until withdrawn
• Total contributions (Roth and pretax) up to $18,000 of compensation, $24,000 if age 50 or older (2016)
• Qualified distributions are federal income tax-free

• 5-year holding requirement AND

• Either age 59½ or disabled

• Nonqualified distribution–the federal income tax and 10% premature distribution tax may apply to the earnings portion
• Treated the same as pretax contributions for all plan purposes (withdrawal rules, etc.)

Annuities

• An annuity is an investment contract
• You invest money in return for the insurer’s promise* to make payments in the future (e.g., retirement)
• Funds grow tax-deferred
• May provide death benefit (insurance features such as a death benefit are generally accompanied by higher costs)
• No limit on the amount you can contribute

• Distributions subject to ordinary federal income tax on earnings portion
• An additional 10% premature distribution tax may apply if withdrawals are made before age 59½ (exceptions apply)
• No required minimum distributions after the e of 70½
• Can elect to convert annuity into guaranteed* lifetime income stream
• Typically impose a surrender fee in addition to other fees and charges

A company’s promises and guarantees depend on its financial ability to meet its obligations.