Disability Insurance for Medical Market
.
Retirement Planning
Request a Pension Plan quote Census form
When planning for retirement you should fully fund the tax-deductible and tax-deferred savings plans that are available to you as an individual and through your employer. First on the list should be plans where the employer makes contributions and/or matches your contributions. Next should be any IRA’s that you qualify for. As you climb the investment pyramid, it becomes increasingly important to seek help from an expert.
The following is a summary of retirement plans:
- 401(k) - can be sponsored by businesses of any size. The maximum employee contribution is $13,000 for 2004, $14,000 for 2005 and $15,000 for 2006. If the employee is aged 50 and older, an additional "catch-up" contribution amount is allowed. The additional contribution amount is: 2004 - $3,000; 2005 - $4,000; and 2006 - $5,000. Some employers will match contributions. The maximum Employee plus Employer contribution is the lesser of 25% of compensation or $41,000 in 2004 ($42,000 in 2005). You can choose among a variety of separate accounts to invest.
- 403(b) - is sponsored by Tax-exempt institutions such as government and non-profit organizations. The maximum employee contribution is $13,000 for 2004, $14,000 for 2005 and $15,000 for 2006. If the employee is aged 50 and older, an additional "catch-up" contribution amount is allowed. The additional contribution amount is: 2004 - $3,000; 2005 - $4,000; and 2006 - $5,000. There is also a "lifetime catch-up provision" available only to employees with 15 or more years of service with a qualified organization. This provision may allow you to increase your salary deferral contributions above your basic salary deferral limit by up to $3,000 per year, up to a lifetime limit of $15,000. To qualify, you must be a long-term employee who has contributed on average less than $5,000 a year to your 403(b) plan. The 403(b) Lifetime Cat-up is called the "15-year rule" in IRS Publication 571". Some institutions will match contributions. The maximum Employee plus Employer contribution is the lesser of 100% of compensation or $41,000 in 2004 ($42,000 in 2005). You can chose among a variety of separate accounts to invest.
- SEP-IRA - or Simplified Employee Pension IRA, is a tax-deferred retirement plan provided by sole proprietors or small businesses of 10 or fewer employees, most of which do not have any other retirement plan. Contributions are made by the employer only, up to 20% of each employee's total compensation, with a maximum contribution of $41,000 in 2004 and up to 25% of each employee's total compensation, whichever is less, with a maximum contribution of $42,000 in 2005 whichever is less. The employer can vary the contribution from year to year.
- Simple-IRA - is a tax-deferred retirement plan provided by sole proprietors or small businesses (fewer than 100 employees) who do not maintain or contribute to any other retirement plan. Contributions are made by both the employee and the employer. The maximum employee contribution is $9,000 annually in 2004 ($10,000 in 2005) with an additional $1,500 in 2004 ($2,000 in 2005) if you are over 50. The employer contribution, generally, is a dollar-for-dollar match up to 3% of pay or a 2% non-elective contribution for each eligible employee.
- Keogh - A Keogh plan is a tax-deferred retirement plan designed to help self-employed workers or individuals who earn self-employed income establish a retirement savings program. There are two different types of Keogh plans, the Profit Sharing and the Money Purchase plan. Under Keogh regulations, the Money Purchase contribution is mandatory; you must make the same percentage contribution each year, whether you have profits or not. The Profit Sharing contribution can change each year. Individuals can contribute to both types of plans in the same year. The maximum contribution is $41,000 annually.
- IRA - Individual Retirement Account, is a tax-deferred investment and savings account that acts as a personal retirement fund for people with employment income. There are two primary types of IRAs: Regular and Spousal. Regular IRAs are designed for individuals with earned income, while Spousal IRAs are designed for married couples in which only one of the spouses has earned income. You have the option of investing in a wide variety of investments.
For Regular and Spousal IRAs:
Your contribution is fully tax-deductible if:
Your contribution is partially tax-deductible if:
- Neither you nor your spouse participated in a company-sponsored retirement plan.
- You contributed to a company-sponsored retirement plan: are single and earned less than $45,000 in 2004 ($50,000 in 2005), or married and filing jointly, and had a joint income of less than $65,000 in 2004 ($70,000 in 2005).
Your contribution is not tax-deductible if:
- You contributed to a company-sponsored retirement plan: are single and earned $45,000-$55,000 in 2004 ($50,000-$60,000 in 2005), or married and, filing jointly, and had a joint income of $65,000-$75,000 in 2004 ($70,000-$80,000 in 2005).
- You contributed to a company-sponsored retirement plan: either single and earned more than $55,000 in 2004 ($60,000 in 2005) or married, filing jointly, and had a joint income of more than $75,000 in 2004 ($80,000 in 2005).
- Roth IRA – is an individual retirement account with a maximum contribution of $3000 annually in 2004 ($4,000 in 2005) with an additional $500 if over 50 years old. Contributions to a Roth IRA are not tax-deductible. However, the investments grow tax free and earnings may be withdrawn tax free after 59 ½ as long as the account has been open 5 years. Eligibility for contributions to a Roth IRA is phased out for married couples filing jointly with an AGI between $150,000 and $160,000 and single individuals with an AGI between $95,000 and $110,000. For example, a married couple filing jointly with an AGI of $155,000 would be eligible for a contribution of $1500.
To obtain a more detailed explanation of the various retirement plans, you can visit the irs website at www.irs.gov.