RETIREMENT PLANS…

Social Security – You must work at least 5 years with 4 or more working months in each of those years to qualify. It’s based on your lifetime contribution with the most recent 3 years of income weighing the heaviest on your monthly payout/return/distribution. You can start receiving social security retirement benefits at 62.

401K – (optional) company match up to a certain percentage, pre tax contributions, investment in team managed market securities…(generally increase with time)--- 10% penalty for early withdrawal before age 55… and must pay taxes in addition on distribution. If you are the minimal required age then you just pay taxes on the distribution. The age for required minimal distribution is age 71.

Pension – (mandatory) company match up to a certain percentage, pre tax contributions, investment in team managed market securities…(generally increase with time)--- 10% penalty for early withdrawal before age 55… only age 50 if civil servant(government employee) – fireman, policeman, emergency medical technician, US armed forces, city/state teacher…etc. If you are the minimal required age then you just pay taxes on the distribution. The age for required minimal distribution is age 71.

IRA – (individual retirement account - optional) pre/post tax contributions (depends on particular IRA), investment in team managed market securities… (generally increase with time)--- 10% penalty for early withdrawal before age 55… and must pay taxes in addition on distribution. If you are the minimal required age then you just pay taxes on the distribution. Post tax IRA’s have a cost basis that is deduced by the increase in the total distribution; therefore, significantly lowering tax on the back end of the distribution. The age for required minimal distribution is age 71.

Individual/self investor account – post tax contributions, you/trustee is the investor (limited number of account managers – potentially less commission cost), invest in market securities… stocks, bonds, mutual funds, ETF’s, etc… just like other market engines. You can make more than the historical 8% increase in annual return in the market year after year, or you can make less. Cost basis is deduced from your total accumulated balance… significantly reducing taxes on the back end. Super liquid – no penalty from a distribution at any time, just pay any taxes due… if the amount earned is over $1,500 for the year minus your cost basis for the year of distribution. If the amount is below $1,500 for the year then no taxes are due. Also, certain qualified dividends pay regularly with no taxes incurred on the earnings after 2 years of holding the market security… GO LONG OR GO HOME…!

I strongly recommend having at least two or more of these retirement plans in your financial future. Got taxes? Go to tax tips or my blog for more help hints and tips about taxes!