Tue. Jan 31st, 2023

Top 10 Retirement Plans for 2022

Planning for retirement ought to be in our financial goals early in life as possible. A sound and secure retirement begins with proper preparation during your active work life by diverting a portion of your paycheck into a tax-advantaged retirement savings plan so that your money may expand enormously to assist you obtain peace of mind in later years.

The next hurdle is to decide on the kind of investment plan to subscribe to. There are several types of retirement plans available to you depending on your situation.

The Individual Retirement Accounts (IRAs) helps you save on your own or in addition to the plans that might be offered by your employee. Your employer can offer you a retirement plan to help you save for retirement, known as the Employer-Sponsored Retirement Plans. As a small business owner, you’re not alone when it comes to saving for retirement. You can get some of the plans offered to people with employer-sponsored retirement plans.

Below are the top plans for you;

1. Traditional IRA

For individuals wanting to save on their own or add up to the savings being offered by their employer. They are normally tax-deductible and are  invested across several asset classes including Mutual funds and Exchange Traded Funds (ETFs)

2. Roth IRA

This plan is geared more for people who want a tax-free withdrawal during retirement, and no penalty-free even when you withdraw your contributions before retirement. You can make contributions directly if you earn less than $140,000 as an individual or less than $208,000 if you’re married and file a joint tax return

3. Spousal IRA

This is a plan that allows married couples to strategize in maximizing IRA retirement savings. If a spouse isn’t working, the non-earner can open up a traditional or Roth IRA in their own name and make contributions based on their household income.

4. Fixed Annuities

Opt in for a Fixed Annuity plan if you want to supplement your retirement savings. They are not subject to IRS contribution limits, have predictable benefits as well as tax-deferred growth and are easier to understand.

5. Traditional 401(k)

Your employer can offer you a 401(k) account, and make contributions to the plan with pre-tax dollars. Your investments grow on a tax-deferred basis, meaning you don’t pay taxes on what you invest or its earnings until you make withdrawals in retirement. Also if your employer offers this plan, the minimum age to participate cannot be higher than 21 and it cannot require more than a year of service to participate.

6. Roth 401(k)

This is by far one of the biggest plans offered by employers as part of their 401(k) plan. With a Roth 401(k), your contributions are after-tax dollars rather than pre-tax dollars, and the withdrawals you make in retirement are not taxed as income. If you think you’re in a lower tax bracket today than you will be in retirement, then this account is the better choice. Additionally, if your employer offers this plan, the minimum age to participate cannot be higher than 21 and it cannot require more than a year of service to participate.

7. 403(b) plan

Your employer could provide a 403(b) plan especially if you work for a public school or a nonprofit. If you qualify, you may contribute pre-tax from your paycheck, and your money will grow tax-free until you start taking withdrawals in retirement. Some 403(b) plans permit Roth accounts, which function similarly to Roth 401(k)s.

8. 457(b) plan

As an individual who is a state worker or an employee of a local government agency, you may be able to save for retirement in a 457(b) plan, which allows you to invest pre-tax money from your paycheck to a retirement account. The account is tax-deferred, so you don’t pay taxes on your contributions or earnings until you begin to make withdrawals in retirement

9. SIMPLE IRA

As a small business owner without a retirement plan for employees, consider a Savings Incentive Match Plan for Employees IRA, commonly known as a SIMPLE IRA. With a SIMPLE IRA, you must make contributions for each of your employees. Employees are immediately vested, that is they have full ownership of all of the funds in their accounts and the contributions you make by your business can be deducted from its taxes.

10. EP IRA

You can open the Simplified Employee Pension (SEP) plan if you’re a small business owner. Don’t be confused by the name, SEPs are defined-contribution retirement plans, not pensions. Simplified Employee Pension plans establish SEP IRAs for self-employed individuals and small business owners. Conditions are that employers must offer SEP IRAs to all employees who are 21, earn at least $600 per year from the business and who have worked for the company at least three out of the last five years.

In Conclusion:

With some of these retirement plans, you’ll have access to it through your employer.That means if your employer doesn’t offer them, you really don’t have that option at all. But if you’re self-employed or earn any income type, then you have options to set up a retirement plan for yourself. In any case, you can prepare for a secure retirement when you start planning and actually saving or investing early. Not forgetting how much money you’re guaranteed from these tax advantages.

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