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Financial Tips With Josh Duncan (Video) – Saving for Retirement

By: Josh Duncan

Saving for Retirement – 3 Clear Options Explained

In this 4-minute video, we offer a brief overview of commonly available retirement plans, including key differences between 401(k), IRA, and Roth IRA accounts and a few of the benefits they offer.


Full Transcript of video

Hello, I’m Josh Duncan with SCB News bringing you this edition of Financial Freedom. The purpose of Financial Freedom is to provide tips to help you achieve financial freedom for personal significance.

Saving for retirement has probably crossed the minds of most working Americans. While many look forward to retiring, the longer the distance to retirement, the less of a priority saving can become. It doesn’t help that the available ways to save for retirement are full of rules that take some time to understand.

When I started working for Caterpillar after college, my dad told me to start saving in the 401k. Since Cat offered a 6% match at the time, he told me to contribute at least 6%. This was great advice that started a good saving habit. Let’s review some of the most common retirement savings options.

Employers can offer plans where employees contribute a portion of their pay to the plan. This happens before the paycheck is deposited. The employer will often match the employee’s contribution up to a certain percentage. Common names for these plans are 401k, 403b and SIMPLE IRA. One of the easiest ways to learn about the plan offered by your employer is to ask for the Summary Plan Description.

More and more employer plans are offering the option of ROTH contributions. Traditionally, the employee’s contributions are pre-tax. This means you will not pay income tax on your contributions. Income taxes are paid when you take money out of the plan. For the ROTH option, taxes are paid on the contributions. When you take the money out, no taxes are paid. Any match from your employer is pre-tax.

Another way to save for retirement is using IRA’s. IRA stands for individual retirement account. These accounts are registered to one person with the option to add primary and contingent beneficiaries.

The Traditional IRA is typically used for pre-tax money. Since these plans are not sponsored by an employer, you make contributions from your bank account. Although you have already paid taxes on the money in your bank account, you may get a tax deduction for your contributions when filing your taxes. There are some rules on the deductibility of contributions so you want to verify how your taxes will be affected.

Next is the ROTH IRA. Like the ROTH options we discussed earlier, contributions to this plan are not tax deductible. The benefit is any growth can be withdrawn tax free, if five years have passed since your first contribution and you are at least 59 ½ years old.

You may have heard about the magic age of 59 ½ when it comes to retirement accounts. What you need to know is that money withdrawn from a retirement account before reaching this age is assessed a 10% penalty. There is an exception for someone who left their employer between the ages of 55 and 59 ½. Since this is a simple review, I’ll direct you to your financial advisor for this one.

This is just a brief overview of commonly available retirement plans. There are other options provided by employers and available to individuals. All the mentioned plans have annual contribution limits, with the employer plans having the highest limits.

Ask your financial advisor can guide you to the options that best meet your goals.

Thank you for joining me for Financial Freedom. I'm Josh Duncan, Financial Advisor with F5 Financial Planning, helping you achieve financial freedom for personal significance. Please contact me here to send topics you would like me to cover. See you next time.

Photo credit: SCB Video TV Marketing (producers of the video)

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