Knowing how to plan for your retirement is not rocket science, it is actually very simple and anyone can do it. There are various 2019 retirement plan types that are available and they are not as complicated as most people might be tempted to think. Each type is different and has its own limitations. The limitations usually depend on gross income but some plans can depend on the amount that you will be contributing annually. The age at which you can withdraw your money will vary from one plan to another and so do the penalties. Comparing the different types will help you get choose the plan that is perfect for you.

  1. 401 (k) plans.

This is a workplace retirement plan that is specifically for the benefit of the employees. The 401 (k) plan will allow you to contribute a small amount of money from your pre- tax paycheck to tax- deferred investment. It will help you lower the amount of money you should be paying annually.

For example if 5000 dollars will be contributed to your 401 (k) plan if you are earning 75000 dollars. The investment will keep on growing until it is time to withdraw your retirement money come. If for any reason you decide to withdraw your money before due time, you will incur a penalty of 10 percent and it will be subject to state and federal income taxes.

Most employers usually match the contributions of the employees by up to 6 percent although it is a contribution that is done over time. Meaning you will not be able to get any contribution from your employer if you leave the company you are working for before the time prescribed for you. The contributions to the plan are yours.

The employers who offers the 401 (k) plans will often allow you to make contributions to your plan through automatic deductions. The IRS do impose limit on the contributions you can make in a year although the plans are more generous than others.

As of 2019 the limit is 19000 dollars but it can increase if you are 50 and above to 2500 dollars. There are variation of this plans which include 457 (b) plans which are offered to the employees employed by the government and 403 (b) plans which are offered to non-profit workers and educators.

  1. Individual retirement accounts (IRAs).

IRA accounts are tax favored investment accounts. You can use the IRA account to invest in mutual funds, ETFs, stocks, bonds and other investments. You can hire a professional to help you make the decision or you can do it yourself. If your employer is not offering a 401 (k) plan, this can be a good option for you. You can also use this account if you have saved to the limit on your 401 (k) plan.

In 2019 the limit is 6000 dollars but if you are 50 years and above, you can save up to 7000 dollars. You can be sure to buy or sell the investments within your account but if for any reason you decide to withdraw your savings before you are 59 and half years you will have to pay a 10 percent penalty. You should keep it in mind that the amount you withdraw will be subject to state and federal taxes.

  1. Roth IRAs.

Unlike the normal IRA, Roth IRA contribution are usually made after tax. After that, the money will not be a subject to taxation ever again. The good thing about Roth IRA is that you can withdraw the money even before you get the retirement age without incurring any losses.

Using a Roth IRA account is a perfect way to start saving for your retirement if you are not so sure about it and you want to give yourself a break from the taxing. You can contribute to an ordinary IRA account and Roth IRA account but you should keep it in mind that the contributions cannot go beyond 6000 dollars in a year.

  1. Roth 401 (k).

This method is rather new and it combines features of a 401 (k) plan and Roth IRA. It is usually offered through the employers. Just like the Roth IRA the contributions that you make are usually after tax meaning that after you have saved your money is not subject to any other taxation.

If your modified adjusted gross income reaches a specific point, the limits become a little bit stricter and you can be prohibited if you earn too much. As of 2019 the phase out begins at 122, 000 dollars. The limit for the married taxpayers can increase up to 193, 000 dollar and could increase to 203, 000 dollars.

  1. Simple IRA.

The savings incentive match for employees (SIMPLE) IRA is a plan that is usually offered to the small businesses that have up to a hundred employees. The contributions are pretax paycheck withdraws and the money grows tax deferred until you reach the retirement age.

If you have any emergency perhaps you might want to consider finding another way of getting money because withdrawing from your savings before the age of 59 and a half leads to a hefty penalty of 25 percent. Keep it in mind that you cannot borrow from a SIMPLE IRA like you can borrow from a 401 (k).

  1. SEP IRA.

This plan allows you to contribute some amount of money from your income to a retirement plan of yours if you are self- employed and you don’t have any employees. You are allowed to deduct the contributions from your taxable income. Maximum contribution for this plan is usually higher more tax favored and you can be sure to contribute up to 56, 000 dollars or 25 percent of your income, whichever is less.

Those are the 2019 retirement plan types and you can be sure to go for the one that fits you the most.

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