Taxes and Retirement

1. Retirement is a growing issue in the United States. It is projected that social security will only provide 40-70% of post retirement income for most Americans.

2. For some people living on purely social security, they are living at or near the poverty level.

3. Age 66 is full retirement age. If someone were to retire before 66, they would only get a portion of benefits from social security.

4. There are other retirement programs in place in the United States. 401K, 403b are just two of them.

5. Pensions were once the standard for retirement. However, the trend is that many companies who have had traditional pensions for employees are trying to drop those plans, which results in adjustments for those receiving and/or expecting pensions.

6. Taxes are a major point to understand in retirement planning. Taxes are considered one the biggest impediments to creation of personal wealth.

7. The tax savings/incentive is immediate in the year you make the contribution to an approved plan. The tax advantage is that you do not pay federal and state income taxes on the money you set aside for all qualified retirement plans.

8. Earnings from interest/dividends are not taxed from the time you put it in until you take it out. Almost all retirement plans allow you to defer or eliminate taxes on interest income, dividends, and other gains/earnings of funds in retirement plans until you retire and begin to withdraw the accumulated funds.

9. 401K/403B Plans are often called cafeteria plans, these retirement plans are self-directed and available at many businesses and jobs. The two plans are very similar with 403B plans offered at some governmental employment centers.

10. A pension is basically a retirement plan that is supported by the employer either singularly or in a shared contribution with the worker contributing a portion of their salary. State and federal government, school districts, unions still offer them!

11. Pensions do not allow you to control or...