Financial Tips

What are my options for saving for retirement?

By November 20, 2014January 14th, 2015No Comments

I’m pretty sure no one likes to get old, or even to think about getting old. In fact, most of us deny our age and have 25 “30th” birthdays. However, there comes a time when we have to face reality and realize that yes, we are in fact getting older.

There is one perk I can think of when it comes to watching the number of candles on your birthday cake multiply; retirement. Yes, that wonderful time of your life where you get to spend the winter months somewhere warmer and play golf every day, just because you can. While working the grind of 9-5 there has to have been times that you looked forward to this elusive thing called retirement. But what happens if you get to retirement but have no money set aside? You guessed it, you get to keep working! Lucky for you, you’re reading this article and are now on your way to learning about your retirement financing options.

First and foremost, you should check with your current employer (if you are employed) to see if they offer any type of 401k. Some companies allow employees to contribute to a 401k after a certain amount of time spent working for them and some will even match what you contribute. However, if your employer does not offer any type of retirement savings program you still have some options. An IRA, which stands for Individual Retirement Account, is a great way to save money for retirement in the absence of, or in addition to, a 401k. There are two different types of IRA’s; Traditional and Roth. The chart below outlines the differences between the two.


Traditional vs. Roth IRAs

Characteristics Traditional IRA Roth IRA
Who can contribute? You can contribute to your own IRA if you receive a taxable income. Or in the case of a one income household, your spouse can contribute on your behalf if you file jointly.


Unfortunately, you must cease contributions when you reach the age of 70½.

You can contribute to your own IRA if you receive a taxable income. Or in the case of a one income household, your spouse can contribute on your behalf if you file jointly.

Unlike the traditional IRA, there is no age limit for contributions and you may continue them as long as you would like.

Are my contributions tax deductible? If you meet certain criteria, you can deduct your contributions from your taxes. With a Roth IRA, your contributions are not tax deductable.
How much can I contribute? This is one category where Traditional and Roth IRA’s are the same. The most you can contribute in one year depends on your age. Stated limits are as follows:

$5,500 (for 2013 and 2014), or $6,500 if you’re age 50 or older by the end of the year.

What is the deadline to make contributions? The deadline for contributions is the same as your tax return filing deadline (not including extensions). For example, you have until April 15, 2015, to make your 2014 contribution.
When can I withdraw money? You are entitled to withdraw money at any time. However, withdrawing money before certain time restrictions have been met will cause you to receive monetary penalties. For example, if you are under age 59 ½ when you withdraw money, you may have to pay an additional 10% tax for early withdrawals unless you qualify for an exception.
Do I have to take required minimum distributions? With a Traditional IRA, you are required to start taking distributions by April 1 following the year in which you turn age 70½ and by December 31 of later years. If you are the original owner of the Roth IRA, distributions are not required.
Are my withdrawals and distributions taxable? Yes, both deductible contributions and earnings you withdraw or that are distributed from your traditional IRA are taxable. If it’s a qualified distribution (or a withdrawal that is a qualified distribution), then it will not be subject to tax.



If you are still unsure which option is best, please come in and talk with one of our team members. We would be happy to help walk you through the process of deciding how you will finance your retirement adventure. After all, we want to be able to retire one day too!


***The information contained herein is provided solely for informational purposes and does not constitute tax or legal advice.  You should consult with a qualified tax or legal advisor with respect to questions regarding your HSA and qualified medical expenses.