Simply Junior

Preparing for retirement is essential if you want to be able to maintain your standard of living after you leave work. There are a number of different types of retirement plans.

Social security offers a government sponsored financial support option that can provide some support during your golden years. It is supported through taxation. Social security can be combined with personal retirement plans. Social security should not be relied upon as the only source of income during retirement.

An employer sponsored investment plan is linked to your employment. Qualified employer sponsored plans such as the 401k offer tax benefits to participants, while non-qualified plans are usually taxed. Employer sponsored plans can be combined with private plans. The availability of an employer sponsored plan will depend upon the employer, who will choose the options that they wish to offer, if they are going to provide any sort of plan. If your employer does offer a retirement option, then it will usually be in your best interests to participate. You may be able to benefit from matched contributions into your 401k, for example, which means that your employer will match the contributions that you make into your retirement plan.

Private or personal retirement plans are another option. The most common form of this type of plan is the IRA or Individual Retirement Account An IRA does not depend upon the participation of the employer and it is, therefore, ideal for people whose employer has not chosen to offer a retirement planning option.

Annuities are another way for individuals to invest their money towards retirement. They are a form of financial insurance which offer a tax deferred means of saving. An annuity will provide a regular income once you retire. Annuities often offer excellent benefits for your family in the event of your death, and they are, therefore, an excellent way to guarantee peace of mind and financial security for your loved ones.

Establishing good saving and spending habits in your kids at an early age may not be as difficult as you think. It will require a little due diligence on your part but is well worth the effort in the long run. The following tips along with a running dialog can help you jump-start your kids onto the road to financial security.

1. Match their savings dollar for dollar…or quarter for dollar. What better incentive for kids to save their money than for them to know that for every dollar they put away, it will be matched by a given amount. It’s kind of like “free” money. Okay, so it may not be free for you, but you’re helping establish the habit of saving and, in the long run, it will have been worth the extra money you had to put up.

2. Give them interest on their savings. This is another example of “free” money. And depending on where the interest comes from, it may even be free to you. Opening a savings account at a bank or credit union will usually mean your child will receive interest/dividends on his balance each month. But keep in mind that this interest is typically not a whole lot, especially for the kind of balance a young child may have. And not many kids get excited about seeing 12 cents deposited in their account. So consider setting up your own interest payment plan for your child’s monthly ending balance. Ten dollars earned on a balance of $100 (10% interest) is a lot more appealing than 10 cents earned. And you can vary the amount of interest you give as their balance grows. Which leads us to the next category…

3. Illustrate the power of compound interest. Show your child what can happen to her money over time if she saves it and is earning interest on it. This is called compound interest, the building of an account’s value on itself. You’ll probably have to go out several years for her to get the full impact of this compounding. A great way to visually illustrate this is through a software program called KidsSave by Kidnexions. Included in this virtual savings program is a section where kids can experiment with different savings scenarios to see what happens to their account money over time. Kids get to see in graph form the curve that is made through compounding interest which can be a very enlightening experience…even for adults!

4. Give them an allowance. An allowance is a popular way to get money into the hands of kids. Most parents consider an allowance as an “earned salary” for doing chores. But once you hand over the money, how do you keep kids from spending it all? Consider having your child save a portion of it; the rest is theirs to spend. That way we get our cake…the saving…and your child gets to eat a slice of it…the spending.

5. Have your child set up a personal financial goal. Give your child a concrete reason to save. That really cool pool toy that he just has to have. Help him create a plan to save the money to buy the item himself. Maybe you could match him dollar for dollar. But whatever you do, start simple. Make sure the goal is easily attainable and make it happen in a relatively short period of time. Attaining success quickly will increase the chance he will want to set up another goal, at which point you can increase the time or the amount they need to save.

And, of course, kids are notorious at watching what you do when you’re not looking. If you model good saving and spending habits, chances are, your kids will probably do the same.

Annuities, and the related annuity shelter strategies, are the call of modern life and lifestyle. They come with mixed bag of pros and cons depending upon the preferences, needs and requirements of the people. It offers some wonderful investment and saving options in certain situations. It would be wrong to generalize the comprehensiveness of various annuity plans as they are diverse and miscellaneous in their relevance.

Just as the every human situation is diverse, so is their demand for an investment plan for themselves. Since it may not be everyone’s cup of tea to understand all nuances of annuities, we have brought in here few well-researched and well-represented annuity shelter strategies. Hopefully they would provide insight for many who do not know much about annuities -

There are basically four kinds of annuities – the fixed, the variable, the deferred and the immediate. The fixed annuity pays a designated interest rate for the specific time period. This type of annuities are invested for the prime reason of long term saving. In case of an immediate annuity plan, the insurance company starts paying the returns to be investor just as the plan is entered. A variable annuity has a varying profile where the investor is required to investment in various portfolios such as stocks, mutual funds etc. Those who want safety of their investments must never get into variable annuity plan since their portfolios fluctuate along with ups and downs of economic scenario of the financial market. One of the sound annuity shelter strategies is never to be rash in investment and always resort to the advice of a financial advisor. Keep the long term benefits in mind at the time of purchasing the suitable annuity plan. The idea is to keep the finances available after retirement or old age for financial security. Treat annuities as saving-vehicles and not as mutual funds. There are variety of annuity plans in the offing that offer various benefits for different age groups such as short-term bonuses, retirement benefits, educational benefits for children or grandchildren of annuitant, benefits for charity, benefits for higher education, and numerous retirement plans. One of the annuity shelter strategies is not to consider the interest yield the prime factor in mind. Some times a financial product has many lucrative offers along with the not-so-promising yield. Fixed annuities have the lowest risk level while the variable annuities have the maximum. Always prefer to take back your annuity payments and benefits stretched over period of time rather than in a lump sum manner. The lump sum receiving of annuity benefits may invite tax issues. One of the important annuity shelter strategies is to designate the heir, inheritor and beneficiary of the primary investor clearly at the time of signing the annuity agreement. Any lapse in designating the nominee may result in great confusion and discomfort at later stages in life.
With complete understanding of above mentioned annuity strategies, and many more, the investing and savings would become all the more interesting.

When you think of lists of retirement plans, you will automatically think of financial security – a list of plans you can invest in, different things you can invest in, how much you should invest every month, what sort of a return you can expect – but this is not the only kind of lists of retirement plans that you should have in mind. After all, if money and financial security are the first things that came to your mind when you heard ‘lists of retirement plans’, odds are that you will have already made sure that you have a nest egg you can count on by the time you do retire.

So what other lists of retirement plans should you have in mind? Well, when you have the nest egg, and have money enough to be comfortable, once you have paid off the mortgage and have paid off all the loans, what exactly are you going to do?

Have a list of the things you want to do, things you always thought you would do once you could get rid of all the responsibilities that seemed never to end. Take a breath and relax – a whole lot of those responsibilities have melted away from your shoulders. So now what do you want to do?

Odds are that you will feel empty, instead of exhilarated. You will feel as if there is nothing left to do. This is where you are wrong – this is where you can do everything you want! Think of your hobbies from when you were a kid. Maybe you collected shells, or stamps, or beautiful stones. See if you can find your old collections. If you can, great – and add to them. If you cannot find them, start afresh. Look at it as a new beginning.

Now go on to your high school and college. There must have been friends who you thought you would never lose touch with, but have not heard from for years. See if you can track them down – one thing you have now is the time to do these things.

You can go online and try social networks to find old friends and catch up – odds are that they will be surprised, touched and delighted. Once you do that, you can create a blog of your own to keep in touch with these people.

Spending time with friends and family should be yet another priority now. Now is the time for you to play the part of the perfect grandparent!

These are also lists of retirement plans that you must pay attention to. After all, you can be financially secure and still feel lost – you can stop that if you pay attention to these little details.

There are different types of retirement plans – government-sponsored plans, personal plans, annuities and employer-sponsored plans.

What’s the point of knowing all these plans?

This is because your employer’s retirement savings plan is important for your future financial security. You should understand how your plan works and what benefits you’ll receive. And it’s in your best interest to keep track of your retirement benefits too.

Let’s look at these different types of retirement plans.

Government-Sponsored Plans

Social Security plan is the best example in this category.

Personal Plans

Individual Retirement Agreement or IRA is the most well-known example. They can come in different types according to their tax treatments.

Annuities

These are contracts established with an insurance company. They can be fixed and variable annuities .

Employer-Sponsored Plans

2 types – qualified and non-qualified retirement plans.

Qualified Retirement Plans

These plans meet the Internal Revenue Code (IRC) requirements and the Employee Retirement Income Security Act of 1974 (ERISA) requirements.

They offer several tax benefits such as allowing employers to deduct annual allowable contributions for each participant of the plan; contributions and earnings on those contributions are tax-deferred until each participant withdraw them and each participant can even further defer some of the taxes through a transfer into a different type of IRA.

You can go for these qualified plans:

(A) Defined Benefit (DB) Plans

These are company retirement plans like pension plans, in which a retired employee receives a specific amount based on salary history and years of service, and in which the employer bears the investment risk.

The employee, the employer, or both may contribute to the plan.

Examples of DB plans:

1. Pensions

They’re a type of retirement plan that guarantees a specific amount to be paid out to the employee when he/she retires. The amount is calculated based on an employee’s salary, years of service and a fixed percentage rate.

The Pension Benefit Guarantee Corporation (PBGC), a federal agency, covers employer-sponsored pension plans.

Eligibility for the plan depends on a company’s policy. Some companies require their employees to serve for a certain period of time before they can become eligible for a pension plan. If an employee leaves the job, the pension plan stays with the previous employer.

2. Annuities

They’re retirement plans that have fixed monthly payments at the age of retirement. You can’t transfer the annuities into an IRA account, hence the amount is taxed as regular income the year you receive it.

(B) Defined Contribution (DC) Plans

These plans allow the employer and/or employee to make contributions, so that the final benefits depend on how much is in the account and the rate earned by the account’s investments. Each participant needs to set up his/her own individual account in the plan.

The government doesn’t guarantee a participant’s pension benefits. Instead, the plan allows employees to decide on the investment, based on the employer’s options.

Some examples of DC plans:

1. Profit Sharing Plan

It allows an employer each year to determine how much to contribute to the plan (out of profits or otherwise) in cash or employer stock. The plan contains a formula for allocating the annual contribution among the participants.

2. 401k Plan

An employee can make contributions from his/her paycheck before taxes are taken out. The contributions go into a 401k account, with the employee often choosing the investments based on options provided under the plan.

In some plans, the employer also makes contributions, matching the employee’s contributions up to a certain percentage.

3. Employee Stock Ownership Plan (ESOP)

The employer contributes shares of the company’s stock to employees in return for special tax benefits.

4.Stock bonus plan

It’s a type of profit sharing plan, where contributions are made in the form of company stock.

Non-qualified Retirement Plans

These plans don’t meet the IRC or ERISA requirements. Employers fund these plans. They’re more flexible but don’t have the tax benefits qualified plans have. Upon your retirement, your employer pay you the benefits (in the form of annuities) which are taxed as ordinary income tax, or in lump sum payments, which you can transfer into an IRA to defer taxes.

An example is the 457 plan.

This plan aims at state and local government employees of tax-exempt organizations. Your contributions and earnings are tax-deferred until you withdraw them.

Distributions start upon your retirement but you can also take distributions if you change jobs or if you’ve an emergency.You can choose to take distributions in one lump sum, in annual installments or as an annuity. Distributions are subject to ordinary income taxes and you can’t transfer the amounts into an IRA.