Pensions, annuities, 401(k)s, IRAs – there are so many different savings vehicles available that it can be a bit confusing to figure out what’s right for you.
But it’s not as complicated as it sounds – just use the tools and information provided in this section to determine how much you need to save and what vehicles can help you reach that savings goal. You’ll get a large return on a small investment of your time – just a few moments learning about your options can pay off financially in the long run!
Most people rely on three main sources of income during retirement, often referred to as the “three-legged stool”:
- Social Security: Use this Social Security Calculator to estimate what your social security benefits will be when you retire. Remember, Social Security will probably not provide you with all the income you need to live comfortably in retirement. That’s why you need other sources of income like:
- Personal Savings: Basically, saving for your retirement comes down to just two questions: “How much do I need to save?” and “Where should I save it?”
“How much do I need to save?”
While there are many variables involved in determining how much you need to save to avoid outliving your retirement savings, you can get a general idea with the Interactive Ballpark Estimate, a planning tool provided by Choose to Save, a project of the Employee Benefit Research Institute and the America Saves Education Council. This calculator will consider your age, income, and future Social Security and Pension benefits to determine how much of each paycheck you need to save now. If you can’t save as much as the calculator recommends, don’t be discouraged – whether you save a little or save a lot, just save something! It will add up over time. Learn more…
“Where should I save it?”
Today there are many more retirement savings vehicles available to you than your grandmother’s traditional savings account. These include:
- Employer sponsored retirement plans: There are different types of employer-sponsored retirement savings plans. The popular 401(k),named for section 401(k) of the United States Internal Revenue Code, allows you to have part of your paycheck automatically deposited into your employer-administered 401(k) account, where it is saved for your retirement. If you work for government, a public school or non-profit organization, you may be eligible for a 403(b) or 457(b) plan. Check with your employer to see if they provide a retirement savings plan.
- Individual Retirement Accounts: Individual Retirement Accounts (IRAs) offer significant tax advantages over personal savings accounts. A traditional IRA allows you to defer taxes until you withdraw the money in retirement, while a Roth IRA allows you to deposit after-tax income and then withdraw the funds tax-free. Learn more…
- Annuities: Annuities are contracts made with insurance companies in which you pay a premium or series of premiums in exchange for future payments to you that can be made to last for life. Financial Solutions Online, a web-based resource for accountants, offers an overview guide to annuities. Learn more…