英语论文网

Security, this cap is based on a year by year basis (Appendix D). Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. There is a formula applied to these earnings and you arrive at your basic benefit (Appendix E). This is how much you would receive at your full retirement age 65 or older, depending on your date of birth. Social Security retirement benefits are not intended to be your only source of income when you retire, as the benefits generally average about 40 percent of your former wages (SSA.gov). Savings and other retirement accounts are expected to make up the rest of your sources of income when deciding to retire.

There are many different accounts to look into when starting to save for your retirement. These include 401 (k)'s, Traditional IRA's, Roth IRA's, SEP IRA's, Keoghs, 457's, Employee Stock Ownership Plans (ESOPs), and Defined Benefit Plans. There are many similarities with these accounts, but small differences can have a major affect on your overall retirement plan. It may seem like a daunting task to pick which account or accounts you would like to open, but a little research into the accounts, and how they act will go a long way towards a successful retirement plan. Paying attention to what is going on with your retirement accounts, whether you are looking at returns, fees, or asset allocations will also be in your best interest. Ignoring the accounts until you are close to your retirement age will leave susceptibility to surprises. The last thing needed is a surprise in the amount of money you have set aside for your retirement.

The first of these retirement accounts is a 401(k). 401(k)'s are typically employer sponsored plans and allow employees to contribute a certain amount of their earnings to be set away in their account. The IRS limits the annual amount to $16,500, although they do not limit the monthly contribution (IRS.gov). 401(k) plans can allow additional catch-up contributions in the amount of? $5,500 for employees aged 50 and over. One of the benefits with type of retirement account is that the contributions are taken out before your earnings are taxed, making it a tax deferred account. Another great benefit to this account is that the employer may set out a match amount. Although this is not required many employers will match a certain portion of your contribution to increase participation rates, so you are being paid by your company for your inclusion in their 401(k). Once the money is collected it is then sent to a third party administrator who invests in money market securities, bonds, mutual funds, etc. The employee determines the proportions in the types of investments. A drawback for this plan is if you decide to take out money before you are 59.5 years old you will have to pay the tax on it and the IRS will fine you 10% on the amount that was withdrawn.

A Traditional IRA is another popular retirement account. You are able to put $5,000 a year towards your IRA. There is a catch up phase if you are above the age of 50 and you will be able to contribute $1,000 more a year, bringing you to a total of $6,000. Money you put in a traditional IRA is generally tax-deductible no matter how high your adjusted gross income might be, unless you're an active participant in a qualified employer plan such as a 401(k), 403(b) or 457. If that is the case then there are limits that are set. The money is part