Planning for Your Future
A common financial goal is to afford a comfortable retirement. But that takes planning. Retirement planning includes taking advantage of your saving and investing opportunities through the years, estimating your expenses in retirement, and preparing to have enough money to cover those costs for your lifetime.
Learning how to save for retirement is imperative. There are a number of retirement vehicles available, including traditional and Roth IRAs, employer-sponsored retirement plans, nonqualified deferred compensation plans, stock plans, and commercial annuities. Proper retirement planning requires an understanding of the workings of these tools.
Traditional IRA's
If you're not covered by a retirement plan at work, you can deduct the entire amount of your IRA contribution on your income tax return. For the 2022 tax year, this would be up to $6,000 annually, or $7,000 if you're 50 or older. And for the 2023 tax year, up to $6,500 annually, or $7,500 if you're 50 or older.
Roth IRA's
With a Roth IRA, qualifying distributions are income tax free at the federal level. If your distribution is not a qualifying distribution, then the distribution is taxable to the extent that it consists of investment earnings. Contributions to a Roth IRA are never subject to income tax when distributed, because all contributions are made with after-tax dollars.
Employer-Sponsored Plans
Qualified employer-sponsored retirement plans can provide a number of tax and nontax benefits to employees, including tax deferral and retirement savings benefits. Additionally, employees should consider various strategies to optimize their benefits. For example, employees will approach their retirement plans most effectively when they take full advantage of employer-matched savings and by remaining with a particular company at least until vesting has occurred.