No matter how much you love to work and how happy it makes you spend more time in your office, you can’t work for your entire life and there will come a certain point when you just want to stay at home, enjoy time with your family members and don’t do any work at all.
To prepare yourself for that time, you need to have a retirement plan. This is a plan that gives you guidelines to start saving a small portion of your earnings into a savings account and when you retire, you can use that money to invest in a business or you can also start your own business with that money.
Types of Retirement Plans:
Here are the most common Retirement Plans:
- Individual Retirement Account (IRA):
This is the most common retirement account that is preferred by most old people and by those who want to retire before time. The best factor of an IRA retirement plan is that you get to save an amount of your income in your savings account and you don’t need to pay any taxes on the savings. You can use this money to invest in any kind of shares, stocks, and bonds and the return on investment is also tax-free which makes it possible to grow your savings quickly. You don’t need to pay any kind of tax on the savings unless you withdraw the entire amount and if you take out the savings before age 59 ½, you have to pay around 10% of the penalty amount to the government as tax deductibles. But the good news is that you can withdraw the savings anytime you want which means you can also get early retirement.
- Roth IRA:
This is very similar to the above-mentioned IRA retirement plan but there are some additional advantages and setbacks of this particular retirement plan. You need to pay tax on the amount of your income that you put in your savings account but the good news is that you can invest that saving money in any kind of bonds and stocks and there won’t be any tax deductions on the return on investment. Also, you can withdraw your entire savings at any age without any penalty and you don’t need to pay any tax at the time of withdrawal either. For those who understand that currently, their earnings aren’t that high but in the future, they will earn more, this plan is the most preferred one.
- 401K Plan:
This is a retirement plan that is usually offered by employers for their employees and company workers. This is a very simple plan but it is not that beneficial as compared to IRA or Roth IRA retirement plans. The best thing about this retirement plan is that you get to deduct the savings amount before tax deductions so you get to save on the tax payments. For example, if you earn $30000 and you save $5000 in the savings account, you will only pay tax on $25000 along with keeping the other $5000 tax-free. You can invest the savings in any kind of plan i.e. shares, stocks, and bonds and the return on investment is also tax-free. Alike other plans, when you withdraw the savings before age of 59 ½, you need to pay a penalty of 10% to the federal government as tax deductions.
Free Retirement Plan Template:
Below is a preview of our Retirement Plan Template for our users created using MS Word.
The download button for this Retirement Plan Template is here.