June 15, 2010

Are You Ready For Retirement?

6/15/10 |
Karen Saley, Extension Specialist, Pinellas County Extension

Retirement can either be a pleasure or a struggle depending on how well you did your planning. During our retirement years our income shifts from salary and wages to social security, personal savings, retirement plans and for many, part-time employment. Unfortunately, many of us thought we could rely on social security as the main source of income in retirement. Sad to say, this is not the case. According to the latest figures only 41 percent of our income will come from social security. That means more than 50 percent of our retirement income must come from other sources if we would like to continue to live our current lifestyle.

Retirement planning tips
  • Start saving early and regularly by investing in mutual funds through tax-sheltered retirement accounts. 
  • Establish a diversified investment portfolio. 
  • Take advantage of an employer-sponsored retirement plan by contributing at least the amount required to obtain the full matching contribution from your employer. 
  • Contribute to Roth IRA and/or traditional IRA accounts. 
  • When changing employers, roll over the funds into the new employer’s plan or a rollover IRA. 
  • Don’t touch your retirement savings for any reason.  
Statistics show that pensions, retirement plans, and IRAs account for about 17 percent of income during retirement. Here are a few examples of employer-sponsored and personally-established retirement plans that you should consider utilizing to fund your retirement.

Employer-sponsored retirement plan
  • Defined-contribution
    • 401(k) private corporations
    • 403(b) colleges, hospitals, religious organizations and other nonprofits
    • 457 plans state and local governments 
  • Defined-benefit
    • Pension: Sum of money of money paid regularly by a former employer as a retirement benefit. 
  • Cash-balance : Interest-earning account credited with a percentage of pay on a monthly basis. Only the employer contributes to the plan. 
  • Employee stock-ownership plan (ESOP): Benefit plan in which employers make tax-deductible gifts of company stock into trusts which are then allocated into employee accounts. 
  • Profit-sharing plan: Employer sponsored plan that allocates some of the employer profits to employees in the form of end-of-the year cash or common stock contributions to employee’s 401 (k) accounts. 
Personally established tax-sheltered retirement accounts
  • Individual retirement account (IRA): Personal retirement account which a person can make annual contributions that provide tax-deferred growth.
    • Traditional IRA – Account that offers tax-deferred growth; the initial contribution may be tax deductible for the year that the IRA was funded.
    • Roth IRA – IRA funded with after-tax money (and thus is not tax deductable) that grows on a tax-deferred basis; withdrawals are not subject to taxation 
  • Keoghs: A tax-deferred retirement account designed for self-employed and small-business owners. 
  • Simplified employee pension-individual retirement account (SEP-IRA): Intended for taxpayers with self-employment income and owners of small businesses. 
There are many ways to fund your retirement account. Pensions, IRAs, and 401 (k) plans are just a few. Talking with a qualified financial planner can help you determine which types of investments would be best for your circumstances. For information and advice on choosing a financial planner visit

Join us for a live webinar on June 23, 2010 at 12:15pm when we will discuss in more detail employer-sponsored and personally established retirement accounts.

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