Home > Investment solutions > Retirement education > The changing landscape of retirement
The changing landscape of retirement

Not long ago, retirement consisted of a brief period of time after a person stopped working. Today, retirement is a much different story. 

Longevity

For one thing, people are living much longer than they have in previous generations. That means individuals will need more money to sustain them throughout their retirement years. 

Changing Attitudes

Most people now see their retirement years as the time to do all of the things they were not free to do while working. Buying a vacation home, traveling around the world, starting one's own business or volunteering for a favorite charity are just a few of the ways people are dreaming of spending their retirement years. 

Several different types of retirement plans are available that may help you reach your current and future financial objectives. Some of the choices are summarized in the chart below. When choosing the investments for your plan, consider your investment objectives. Are you seeking growth to help reach your retirement goals? Maybe you have a near-term need for income to finance the purchase of a first home or a college education. Be sure to consider whether you need growth or income, or a combination of both. Which plan best suits your needs? 

GETTING STARTED TODAY

You've heard it before, but it bears repeating...it's never too late to start saving for retirement. Here are a few ways to make good use of the time and money you have during the years before you retire: 

  • Contribute the maximum amount to your employer-sponsored plan. This is an easy step to take. Since the money usually is deducted right from your paycheck, you are less likely to miss it. Your company may also match a portion of your contributions. 

  • Invest additional amounts in an IRA. To encourage individuals who are closer to retirement to contribute more, the limits increase if you are aged 50 or older. 

  • Seek an IRA that offers a range of investments. With a wide selection of funds, you're more likely to find investments suited to your retirement goals and time frame. 

  • Talk to your financial professional. Together you can develop a plan that will help maximize your retirement account in the time you have before you stop working. 
     

  Traditional IRA ROTH IRA SEP IRA 401(k) plan* Roth 401(k)/403(b)
Summary Contributions are typically made with pre-tax dollars. Contributions are made with after-tax dollars. Designed for self-employed individuals and small-business owners and their employees. Employees contribute a portion of their wages to the plan on a pre-tax basis. Elective contributions that are currently includible in gross income.
Annual contribution limits 2008 - up to $4,000 ($5,000 if over age 50) or 100% of earned income, whichever is less. 2008 - up to $5,000 ($6,000 if over age 50) or 100% of earned income, whichever is less.** Up to 25% of total compensation, with a maximum contribution of $46,000 in 2008. Employee funds plan through salary deferrals of up to $16,000 for 2008. Individuals aged 50 or older may make additional contributions. Employer also may make annual contributions up to the lesser of 100% of employee's compensation or $46,000. Combined employee elective contributions limited to $15,500 in 2008. ($20,500 for employees 50 or over)*
Tax treatment Account balances compound tax-deferred until withdrawn. Contributions may be tax-deductible, depending on the individual's income and participation in an employer-sponsored plan. Account balances compound tax-deferred until withdrawn.

Contributions are not tax-deductible.

 Both contributions and the investment earnings grow tax-deferred until withdrawn. Earnings grow tax-deferred until withdrawn. Contributions are tax-deductible. Withdrawals of contributions and earnings are not taxed provided they are a qualified distribution, the account is held for at least five years and made after age 59 1/2, because of disability, or after death.
Withdrawals Required once the owner reaches age 70 1/2 and are taxable. Withdrawals on earnings are tax-free if taken after the owner reaches age 59 1/2 and the account has been open for at least five years. Required once the owner reaches age 70 1/2 and are taxable. Required once the owner reaches age 70 1/2 and are taxable. Required once the owner reaches age 70 1/2, unless still working and not a 5% owner.
Eligibility To open, owner must have earned income and be younger than age 70 1/2 at year-end. Eligibility is based on adjusted gross income (AGI). Certain sole proprietors, partners or business owners, and the self-employed. Most employees are allowed to participate. Some exceptions may include employees who have not worked at the company for a full year or are younger than age 21. If the employer's plan offers this feature, all eligible plan participants can contribute to a Roth 401(k).

Source: www.IRS.gov
Information obtained from third-party sources believed to be reliable. Investors should consult with an appropriately qualified financial professional to seek advice on the tax consequences of each of these options.
*This limitation is by individual, rather than by plan. Although permissible to split the annual employee elective contribution between designated Roth contributions and traditional pre-tax contributions, the combination cannot exceed the deferral limit. **Adjusted gross income (AGI) phase-out limits may apply.

Pages in this section:
•The changing landscape of retirement
•What is the best retirement plan for you
Retirement accounts pages:
•Traditional IRAs
•Roth IRAs
•SEP IRAs
•Converting from traditional IRA to Roth IRA
•Withdrawals from IRAs