BOSTON (CBS) – About 60% of employers offer employees some sort of retirement plan, but not all employees take advantage of the plans offered.
401(k) plans are mostly used in private industry but are available to any employer to set up. The 403(b) plans are for nonprofit organizations such as schools and hospitals. The 457 plan covers state, county and city employees and the Thrift Savings Plan is for federal employees.
Also available for some employees a new option, the Roth 401(k) plan, where you contribute the dollars after taxes and the withdrawals in retirement would be free of federal income tax. Most employers are not offering a Roth 401(k) just yet. Also out there are Roth 457 plans more popular in Florida than here.
Tax law changes made several years ago put retirement plans on an equal footing. This year the contribution limit is $18,000. But you have to be able to earn enough so that you have the extra $18,000 to contribute. Not too many employees are fortunate enough to be able to do that.
If you are working for a small company with fewer than 100 employees they may be offering a SIMPLE IRA (Savings Incentive Match Plan for Employees) for your retirement plan, the limit this year is $12,500 and employers match up to 3%.
And if your employer does not offer a retirement plan, you are not off the hook. You can set up an IRA very easily at a mutual fund company, your local bank, or some of the big financial institutions like Fidelity or Schwab. Fidelity has store front offices where you can walk in for some help.
You can contribute up to $5,500 to an IRA. You must have earned income to contribute. This includes the traditional IRA where you get a tax deduction for the contribution, a Spousal IRA where one of the spouses must have earned income, a Roth IRA where you make your contribution with after tax dollars and a nondeductible IRA.
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