RETIREMENT PLANNER

401(K) PLANS

In 1981 the 401(k) Retirement Plan was created. It is a special type of retirement account funded through pre-tax payroll deductions. Funds in the account can be invested in a number of different stocks, bonds, mutual funds or other assets, and are not taxed on any capital gains, dividends, or interest until they are withdrawn.

The key benefits of a 401(k) retirement plan are that earnings grow on a tax-deferred basis, allowing employer match programs, and flexibility of investments.

TRADITIONAL IRA PLANS

A traditional IRA allows you to save pre-tax dollars for use in retirement. The money in your account can be invested in stocks, bonds, mutual funds, or CDs.

The number one benefit of a traditional IRA is that your contributions are made on a pre-tax basis. This means that when you deposit money into the IRA, you can deduct that amount from your taxable income, which in turn results in paying less income tax for the year.

In addition to receiving tax deductions up front, the money in your IRA grows tax-deferred. So any interest or capital gains are not taxed. Instead, they are deferred until money is withdrawn, at which point the money is taxed as ordinary income.

ROTH IRA PLANS

Named after Senator William Roth Jr. of Delaware, the Roth IRA allows you to invest in stocks or mutual funds as well as derivatives, notes, and CD's.

Individuals may contribute up to 100% of compensation or $5,000. The lesser amount applies for each taxable year; and, the contribution must be made by April 15th (or the tax filing deadline) of the following year.

After the 'seasoning' period at age 59 1/2, all earnings and contributions may be withdrawn tax free. Ask our financial advisors if a Roth IRA is right for you.

COVERDELL EDUCATIONS SAVINGS PLANS

Named after the late US Senator Paul Coverdell, the Coverdell Education Savings Account, formerly known as an Education Individual Retirement Account (IRA), is a means of saving for your children's education expenses.

Coverdell ESAs allow money to grow tax deferred and proceeds to be withdrawn tax free for qualified education expenses at a qualified institution. Plus it includes primary and secondary school, not just college and university.

Total contributions in any year cannot exceed $2,000, and you do not pay taxes upon withdrawing the money, although the initial contributions are not tax-deductible.