Saving for your future is a process, not an event. It is not something that you do once and forget about; it is a continual process of taking action: planning and doing, maintaining and balancing your priorities, and re-evaluating and making changes.
The bottom line is that it is up to you to plan for your retirement. Company plans are a great start, but it is up to you to build a retirement fund to live the lifestyle of your dreams. If you or your spouse has a business, it is up to you both to provide for your retirement by setting up your own retirement plans.
Following is a review of various retirement plans and strategies. [Note: For all Keogh plans listed below, they are qualified plans, so unless it is a profit sharing plan that allows for in service distributions, hardship or loans, the only distributable events are termination of employment, retirement, death, or disability].
Plan/Strategy |
Best for |
Early Withdrawal |
401(k)'Profit Sharing |
Employees who qualify3,7 |
Depends on the plan2,4 |
IRA |
Those who don't have company pension plans or who have put the pre-tax maximum into their company plans |
Always permitted2,5 |
SEP |
Self-employed person who is a sole proprietor1,7 |
Always permitted2,5 |
SIMPLE PLAN |
Employers with 100 or fewer employees who earned $5,000 during the preceding year7, 10 |
Depends on plan |
PROFIT-SHARING KEOGH |
Small-business owner who is funding a plan for himself and employees. Contributions are discretionary.1,7 |
Depends on plan2,6 |
MONEY-PURCHASE KEOGH |
Small business owner who is funding a plan for himself and employees. Contributions are required to be made each year.1,7 |
Depends on plan2,6 |
DEFINED BENEFIT KEOGH |
Self-employed person nearing retirement who needs to fund a larger retirement benefit1,7 |
Depends on plan2,6 |
VARIABLE ANNUITY |
Someone who has put the maximum into other plans and who won't need the money for at least 10 years8 |
Always permitted2,5 |
FIXED ANNUITY |
Someone who has put the maximum into other plans, prefers a fixed rate of return and who won't need the money for at least 10 years8 |
Always permitted2,5 |
CASH-VALUE LIFE INSURANCE |
Someone who has put the maximum into other plans, needs additional insurance coverage, and who won't need the money for at least 10–12 years8 |
Permitted by surrendering your policy4 |
NONQUALIFIED DEFERRED COMPENSATION |
Everyone who qualifies9 |
Generally, only for hardship, but depends on plan |
TAX EXEMPT INVESTING |
Individuals who are in at least the 25% federal marginal income tax bracket |
Always permitted |
Notes:
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Investments are not a deposit or other obligation of, or guaranteed by, the bank, are not FDIC insured, not insured by any federal government agency, and are subject to investment risks, including possible loss of principal.