It’s never too late to start saving for your retirement.
Do you have a retirement plan at work?
Take advantage of saving for retirement at work. If your employer offers a retirement benefit that you aren’t taking advantage of, ask for more information today. The more time you have to let your money grow, the better off you’ll be!
The most common type of retirement plan offered by employers are defined contribution plans — such as 401(k)s, or 403(b)s for non-profits.
Here are the basics of how defined contribution plans work:
- You make contributions –an amount you elect– from your paycheck
- Your employer may choose to make contributions to your account (free money for your future!)
- The money you save is adjusted for earnings and losses until you withdraw it
- Your contributions (if they were pre-tax) and earnings are taxed when you withdraw the funds
- If you withdraw your funds earlier than retirement age, you may have to pay a tax penalty
Your employer’s retirement plan has important details about how taxes and withdrawals are handled. Ask questions so you can make decisions based on what’s best for your situation.
Take advantage of the Saver’s Credit. You may be eligible to receive a tax credit for making contributions to a retirement plan, for up to $2,000 for individuals, and up to $4,000 if married, filing jointly. The tax credit is based on a percentage of how much you contribute and your adjusted gross income. Consult your tax advisor to see if you qualify.
Get started today! Check out Resources for Individuals
About Individual Retirement Accounts (IRAs)
How Individual Retirement Accounts Work
Like the name implies, IRAs are retirement savings accounts that individuals can set up. You don’t need your employer to do it. IRAs are retirement accounts that offer tax advantages over other kinds of savings accounts. Some people who save for retirement in their employer’s plan also save money in an IRA. Some people have only an IRA because they don’t have access to a plan at work.
An IRA can be set up through a financial institution, insurance company, mutual fund or stockbroker. The most common types of IRAs are the Traditional and Roth IRA. Both types of accounts can invest in stocks, bonds, mutual funds and other investments and allow penalty-free withdrawals after age 59 ½. The difference between the two is how they are taxed.
Traditional IRA
- Contributions may be tax deductible, depending on your income and whether your employer offers a retirement plan
- You will pay taxes on your contributions and earnings when you withdraw your money
- Possible penalty for withdrawals before age 59 ½
- No income restrictions
Roth IRA
- Contributions are not tax deductible
- No taxes on withdrawals and earnings, when conditions are satisfied
- Possible penalty for withdrawals before age 59 ½
- Certain income restrictions apply
These are just the highlights. Visit www.irs.gov/retirement-plans/traditional-and-roth-iras for more information on eligibility, annual contribution limits and taxation.
How to Contribute to Your IRA
You can put money in your IRA directly from payroll or your personal bank account. Saving for retirement through automatic deposit is the best way to ensure that you pay yourself first. Automatic deposit is when you set up a schedule so that a specific amount of money is automatically transferred from your bank account to your IRA on a regular basis.
Receive the Saver’s Credit for Making Contributions
You may be eligible to receive a tax credit for making contributions to a retirement plan, for up to $2,000 for individuals, and up to $4,000 if married, filing jointly. The tax credit is based on a percentage of how much you contribute and your adjusted gross income. Consult your tax advisor to see if you qualify.
Get started today! Check out Resources for Individuals
About retirement plans for self-employed people
Self-employed individuals have the ability to save for retirement on a tax-deferred basis as well.
Plans described below offer a high level overview of types of plans that may be available to self-employed individuals. These plans are subject to specific legal requirements and annual contribution limits.
What is a SEP-IRA?
- If you’re self-employed, a SEP-IRA allows you to set aside pre-tax income in a tax deferred savings account, meaning you do not pay taxes on your contribution today, and your earnings grow tax free. You can open a SEP-IRA at many financial institutions.
What is a Solo 401(k)?
- Solo or individual 401(k) plans work much like a company 401(k) plan, and are meant for individuals who have no employees. Contributions can be either after-tax or pre-tax, meaning you can pay taxes on your contribution today, or choose to pay taxes when you withdraw the money at retirement. You can open a solo 401(k) at many financial institutions.
What is a Simple IRA?
- Simple IRA’s are designed for the self-employed and businesses with 100 or fewer employees. The business owner can choose to match up to a certain percentage of the employees’ contributions. Simple IRAs are great starter plans that encourage contributions from employees.
Retirement Plans for Individuals
- Of course, in addition to the types of plans listed above, self-employed people can also consider Individual Retirement Accounts (IRAs). More information about IRAs is in the section called About Individual Retirement Accounts (IRAs).
Learn more about self-employed retirement calculations www.irs.gov/retirement-plans/self-employed-individuals-calculating-your-own-retirement-plan-contribution-and-deduction
Get started today! Check out Resources for Individuals
How can you make the most of your retirement plan?
Set up automatic deposits
You can deposit to your retirement account directly from payroll or your personal bank account. Saving for retirement through automatic deposits is the best way to ensure that you pay yourself first. Ask your employer or IRA provider how you can set up an automatic contribution.
Apply for the Saver's Credit
You may be eligible to receive a tax credit for putting money in a retirement plan, up to $2,000 for individuals and up to $4,000 if married, filing jointly. The tax credit is based on a percentage of how much you contribute and your adjusted gross income. Contact your tax advisor to see if you qualify.
Learn more at www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit
Estimate your need
There’s a lot to consider when calculating how much money you’ll need for retirement. Retirement income comes from a variety of sources, including Social Security, retirement plan benefits, personal savings and assets, and earnings. Thankfully, there are simple online tools to make financial planning easier. Speak with a qualified financial advisor to make sure you are on track to meet your goals.
Plan your future! Check out Resources for Individuals
What about Fees?
As with any purchase, it’s important to know what you are being charged for your retirement plan. Even small fees may have a big impact over time.
There are generally two types of fees when it comes to investing – transactional and ongoing.
Transactional fees may apply at the time of a transaction. For example, a plan may charge an enrollment fee or, if you move your account balance from one retirement plan into a new plan, a rollover fee. In addition, a fund may have a sales charge that applies when you first invest in that fund.
Ongoing fees are typically charged to your retirement savings plan on a regular basis. For example, some plans have annual administration or management fees.
Transactional and ongoing fees can affect how your savings grow over time. That’s why it’s important to ask your retirement plan provider questions so you understand the fees that apply to your plan.
If you don’t know where to start, you can ask your provider: “What are all the fees related to my account?”
Learn more about retirement plan fees and expenses by reading this publication from the US Department of Labor: Understanding Retirement Plan Fees and Expenses.
Visit Resources for Individuals for tools to help you compare the historical performance and current fees of different fund investment choices, and background information for different investment adviser firms and individual investment advisers.
Resources for Individuals
Calculator
Estimate how much money you need in retirement.
Learn More
Review fast and fun educational videos to empower your financial well-being.
Retierment Descions
Find out how to pay yourself in retirement.
Social Security
Learn how much Social Security benefit you’ll receive based on when you expect to claim it.
Retirement Plan Benefits
Learn how to maximize your retirement savings.
Tax Credits
Get the details about the Saver’s Credit.
Analyze Funds
Compare historical performance and current fees for different mutual funds.
Investment Advisers
View background information about investment advisor firms and individual advisers.
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Do you have a retirement plan at work?
It’s never to late to start saving for retirement at work. If your employer offers a retirement benefit that you are not taking advantage of, ask for more information today, and get started saving as soon as possible. The more time you have to let your money grow, the better off you will be!
Many employers choose to offer a retirement plan as a benefit for employees to attract talented people, stay competitive, and reduce turnover costs. Some employers offer traditional pension plans that pay you a specific amount of money after your retire for the remainder of your life based on your age, final wage, and years of service.
The most common type of retirement plan offered by employers today are known as defined contribution plans — usually a 401(k), or 403(b) for non-profit firms.
Here are the basics of how defined contribution plans work:
Must first be verified and approved by Washington State officials at the Department of Financial Institutions and/or the Office of the Insurance Commissioner to ensure it complies with requirements.
Your employer may choose to make monetary contributions to your account (free money for your future!)
The money you save earns interest and grows tax free until you decide to withdraw funds.
If you withdraw funds earlier than planned, you may have to pay a penalty fee.
A relatively new type of defined contrubtion plan, known as a Roth 401(k) allows you to make contributions after you pay taxes and the savings grow tax free. You can also contribute more money to a Roth 401(k) than a Roth Individual Retirement Account (Roth-IRA).
Take advantage of the Saver’s Credit. You may be eligible to receive a tax credit for making contributions to a retirement plan, for up to $2,000 for individuals, and up to $4,000 if married. The tax credit is based on a percentage of how much you contribute and your adjusted gross income.
Get started planning today! Resources for Individuals
Individual Retirement Accounts (IRAs)
How Individual Retirement Plans work
IRAs are retirement accounts that offer tax advantages over other retirement accounts. An IRA can be set up through a financial institution, insurance company, mutual fund or stockbroker. The most common types of IRAs are the Traditional and Roth. Both plans can invest in stocks, bond, mutual funds and other assets and allow penalty-free withdrawals after age 59 ½. The difference between the two is how they are taxed.
Traditional IRA
- Contributions may be tax deductible
- You will pay taxes when you withdraw
- Possible penalty for withdrawals before age 59 ½
- No income restrictions
Roth IRA
- Contributions cannot be deducted from income tax
- No taxes on withdraws and earnings
- Possible penalty for withdrawals before age 59 ½
- Certain income restrictions apply
For more information on both of these accounts, visit
www.irs.gov/retirement-plans/traditional-and-roth-iras
How to contribute to your IRA
You can deposit to your IRA directly from payroll or your personal bank account. Saving for retirement through payroll deduction is the best way to ensure that you pay yourself first. Ask your IRA provider if they offer payroll contributions. Alternately, your employer may be able to establish a Payroll Deduction IRA for employees.
Learn more here www.irs.gov/payroll-deduction-ira
Receive the Saver's Credit for making contributions
You may be eligible to receive a tax credit for making contributions to a retirement plan, for up to $2,000 for individuals, and up to $4,000 if married. The tax credit is based on a percentage of how much you contribute and your adjusted gross income.
Self-employed retirement plans
SEP-IRA
If you’re self-employed, a SEP-IRA allows you to set aside pre-tax income in a tax deferred savings account, meaning you do not pay taxes on your contribution today, and your earnings grow tax free. You can open a SEP-IRA at many financial institutitons across the country.
Solo 401(k)
Solo or individual 401(k) plans work much like a company 401(k) plan, and are meant for individuals who have no employees. Contributions can be either pre-tax or Roth deferred, meaning you can pay taxes on your contribution today, or choose to defer taxes on the inocme you withdraw at retirement. There are restrictions on how much you can contribute per year. You can open a solo 401(k) at many financial institutions across the country.
Simple IRA
Simple IRA’s are designed for the self-employed and businesses with 100 or fewer employees. The business owner can choose to match up to a certain percentage of the employees’ contributions. Simple IRAs are a great starter plan that encourages contributions from employees.
Retirement Plans for Individuals
Of course, in addition to the types of plans listed above, self-employed people can also consider Individual Retirement Accounts (IRAs). See Retirement Plans for Individuals.
Learn more about self-employed retirement calculations IRS Retirement Plans for Individuals
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The Small Business Retirement Marketplace is administered by the Washington Department of Commerce as established in RCW Chapter 43.330.730-750. Plans carried on the Retirement Marketplace are verified by the Department of Financial Institutions and/or the Office of the Insurance Commissioner to meet the requirements set forth in RCW 43.330.732(7) and 735(6)(a).
Enrollment in plans on the Retirement Marketplace is voluntary. Plan enrollment is managed by private financial services firms. Saving through certain plans will not be appropriate for all individuals. Employer facilitation of most retirement savings plans carries certain legal obligations for which employers are entirely responsible. Contributing to a retirement savings plan may offer tax benefits and/or consequences. Other private sector plans not offered on the Retirement Marketplace may charge lower fees. Consult your tax or financial adviser with questions related to investments.
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