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Most individuals will pay for retirement using income
from a combination of employer- or government-sponsored
plans, personal savings and investments and Social
Security benefits.
You and your financial advisor should work together to
evaluate your retirement income resources and determine
how to make the most of them. The following overview can
help you get started.
Employer-Sponsored Plans
You may be able to take advantage of one of the
following employer-sponsored retirement plans:
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401(k) Plans allow you to invest a portion of your
salary in an employer plan on a pre-tax basis. You
lower your current income for federal income tax
purposes and pay taxes on withdrawals later, when
you may be in a lower tax bracket. Many employers
pay you for participating in the plan by matching
a percentage of your contribution up to a set percent
of your salary.
-
Roth 401(k) Plans allow you to invest a portion of
your salary in an employer plan on an after-tax
basis. No taxes are payable upon distribution of
earnings once certain requirements are met.
-
403(b) Plans may be offered by nonprofit organizations
and public education institutions. They work similarly
to a 401(k).
-
Roth 403(b) Plans may be available and work similarly
to the Roth 401(k).
Note: You should strive to contribute to your
employer-sponsored plan at least enough to obtain
the entire employer match offered.
Government-Sponsored Plan
Federal government employees and military servicemembers
can take advantage of the government-sponsored Thrift
Savings Plan. The TSP, which has been available to
civilian federal employees since 1986 and military
servicemembers since 2002, generally works like
a 401(k) plan. All contributions and earnings grow
federal income tax-deferred until you begin to
withdraw money at retirement. Visit the Thrift Savings
Plan Web site at www.tsp.gov
for details.
Military Retirement
Military retired income is a valuable retirement
asset that pays from 40 percent to 75 percent of
military servicemembers’ active-duty base pay for
life. The amount is adjusted annually for inflation. If
you choose to participate in the Survivor Benefit Plan,
a portion of your retired income will be paid to your
beneficiaries after your death. For questions about
your retired income before you retire, contact the
finance, personnel or retirement and separations
office at your installation.
Individual Retirement Accounts
If you have earned income, you can invest in a
traditional Individual Retirement Account (IRA)
or Roth IRA.
-
Traditional IRA contributions may be federal
income tax-deductible, with some restrictions.
They also offer the potential for federal income
tax-deferred growth.
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Roth IRA contributions are not tax-deductible,
but qualified withdrawals — including any gains — are
federal income tax free.
For details, visit the Internal Revenue Service
Web site at www.irs.gov.
Type in the keyword "590."
Social Security Benefits
Most employed or self-employed individuals are
covered by Social Security, the Old-Age
Survivor‘s Disability and Insurance (OASDI)
program of the federal government. Benefits
are based on:
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Length of employment.
-
Your age at retirement.
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Your total earnings.
You can begin receiving Social Security benefits
as early as age 62 or as late as age 70. The
age at which you choose to receive benefits will
affect your payment amount.
Each year, you should receive a personal Social
Security Statement, estimating the monthly benefit
amounts you and your family may receive now and in
the future. Visit the Social Security Administration
online at www.ssa.gov for details.
For Information
The USAA Educational Foundation publication,
Planning
For Retirement, offers more information
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Basic Money Management
Basic Money Management
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