Individual Retirement Account (IRA)
A traditional IRA offers two tax breaks to eligible individuals. First you can delay paying tax on the money you contribute. Second, all of your investment earning are tax deferred. Roth IRAs provide tax benefits at retirement rather than upfront.
Employer Retirement Savings Programs
An option for saving for retirement is a retirement plan offered through your employer. Check with your human resource manager to learn more about retirement savings offered by your employer. The employer might match some or all of your savings through a 401k or 403b.
This is the main source of retirement income for most workers. Social Security is a social insurance program that provides retirement income, disability insurance, and survivor’s benefits for children and spouses. Social Security benefits alone are not enough to offset the 21st century cost of living. Additional income will be needed. Check out this calculator to see how much you will need to retire.
Other Savings Options
In addition to savings through employer sponsored and individual retirement plans, it helps to have some other savings for retirement. Although there is no tax advantage to these savings and investment accounts, there are several advantages including no penalty for withdrawal before “retirement age,” no income tax assessed on withdrawals, and more.