Retirement Funds Are Available For Everyone
By
Liz Lunn
Most of us hope we reach the ripe old age of
retirement where we can kick back and enjoy many
of the finer things in life. To have the
financial capability to do that, one should
start thinking about retirement funding at an
early age. Retirement funds can assure a quality
of living that you have become accustomed to
throughout the years.
Retirement funds are
available in a wide variety of selection and
many investors choose more than one of these
funds to diversify their savings. One may choose
to put a certain percentage of the investment in
an aggressive, yet high risk fund, with the
possibility of a greater return on their money.
Another percentage will be used in a more
cautionary fund with less risk although this
often leads to a lower return.
Unlike the general population, federal
employees can take advantage of several
retirement plans available from the government.
The Thrift Savings Plan (TSP) allows them the
same benefits as a standard 401(k) plan and the
Civil Service Retirement System (CRCS) offers
another avenue of savings where the government
agency adds additional funds based on years of
service.
The Employee Retirement Income Security Act (ERISA)
of 1974 enacted the Defined Benefit and the
Defined Contribution Plans. These retirement
funds differ as the Defined Benefit Plan will
provide a guaranteed payment at the time
retirement which is determined when the plan is
set up with the employer. There is also less
risk with this type of program and those who
choose this plan will need to be with their
employer up to the age of retirement for the
best results. The Defined Contribution plan
differs as there is no stated benefit amount at
the account’s conception although the
contribution amount is in consideration. The
funds can be diversified using several different
methods and it is riskier because it involves
investments in the stock market.
Alternative retirement funds are also
available are the popular traditional IRA and
Roth IRA plans. The traditional IRA provides for
income tax savings at the time of investment
although it is taxed when benefits are paid. The
Roth IRA differs as the monies are already taxed
at the time of investment and encounter no tax
when the investor is paid during the retirement
period. There are several other benefits
available with both plans and a traditional IRA
can be converted to a Roth IRA. Some may also
wish to consider a Target Retirement Fund which
places contributions into both the stock market
and mutual funds. They also provide a greater
control for the investor over the risk of their
investment.
There are several different 401(k) plans
available for the private sector and are offered
by many employers who match an employee’s
contribution at certain levels. These retirement
funds are normally tax deferred and can only be
accessed at retirement age or investors will be
penalized by the IRS in addition to the taxes.
There special occasions where the penalty is
negated and this includes those who buy there
first home, the money is used for medical bills
not paid by insurance, educational purposes and
few other exceptions.
Now is the time for you to consider your
involvement in retirement funds before you get
much older if you want to guarantee a lifestyle
that you currently enjoy.
