Investing for Retirement

Investing for Retirement is More Important Than Ever

People are retiring earlier and living longer than ever. Even if you retire at age 65, you can reasonably expect to live for 20, 30 or even 35 years. With traditional sources of retirement income such as social security and pensions becoming increasingly unreliable, saving enough for retirement is more important than ever.

Think about how much money you will need after retiring to be able to live a comfortable lifestyle without having to depend on the assistance of others. To reach your goal, you need to save consistently and just as important, you need to make sure your savings grow steadily.

Simple Capital Can Help

Whether you are 30 years away from retirement, getting closer or already retired, Simple Capital can help you plan for your retirement and stay ahead.

The Goal: To enjoy a comfortable retirement without having to depend on financial assistance from your children, the government, or anyone else. When you retire you want to be able to afford the life style you really want for as long as you live.

The Plan: Accumulate and grow your retirement savings using a tax-advantage plan and a solid and consistent investment strategy. The sooner you start, the greater the likelihood that you’ll achieve the retirement lifestyle you want. Even if you need to start small, the important thing is to start.

The Result: If you invest consistently the maximum contribution allowed using a well managed mutual fund, you can expect to meet your retirement goal. For example, a 35 year-old person making the maximum contribution to her IRA ($5,000 for 2008) and earning an average of 10% per year (which is about the same as the S&P 500 Index in the past 50 years) could retire at age 65 with a little more than $1 million.

But this might not be enough. Your savings should last for the next 20, 30, or even 35 years. To keep up with the rising cost of living without running out of money, at least that portion of your money which you don’t need to spend in the immediate two or three years needs to continue to grow at an adequate rate.

Retirement Plan Options

Besides the traditional pension and retirement plans offered by many employers, you should take advantage of tax-deferred accounts such as individual retirement arrangements (IRAs). An IRA is a personal savings plan which allows you to set aside money for retirement, while offering you tax advantages. Yes, you can contribute to both a 401(k) and an IRA.

To help supplement your current employer-sponsored retirement plan, consider opening an IRA or contributing the maximum to an existing IRA. You can set up a Roth IRA or a Traditional IRA. The different features of each are summarized below:

Comparison of the Roth IRA and Traditional IRA

	Roth IRA	Traditional IRA
Summary	A Roth IRA offers the opportunity for federally tax-free growth and withdrawals. There are income and eligibility requirements.	A Traditional IRA may allow you to deduct contributions on your income taxes now and pay the taxes when you make qualified withdrawals in retirement. There is no income eligibility limit to contribute.
How do I open one?	It takes just a few minutes to open a Roth IRA account.	It takes just a few minutes to open a Traditional IRA account.
What's the minimum to invest?	There is no investment minimum.
Who's eligible?	Any age with employment compensation.	Under age 70½ with employment compensation.
Can I contribute to an IRA if I have a 401(k)?	Yes, you can contribute to both a 401(k) and an IRA. To help supplement your current employer-sponsored retirement plan, consider opening an IRA or contributing the maximum to an existing IRA.
Can a non-working spouse or spouse not covered by a plan open this type of IRA?	Yes, if the couple files a joint federal income tax return and if combined contributions do not exceed $10,000 ($5,000 each) for 2008 or $12,000 ($6,000 each) for 2008 if age 50 or older or combined compensation, whichever is less.
What are the income limits for making a contribution?	For single filers - up to $101,000 for 2008 ($99,000-$114,000 in 2007 and $101,000-$116,000 for a partial contribution in 2008). For joint filers - up to $156,000 for 2007 and $159,000 for 2008 ($156,000-$166,000 in 2007 and $159,000-$169,000 in 2008 for a partial contribution in 2008).	No income limits.
What are the income limits for making a contribution?	For single filers - up to $101,000 for 2008 ($99,000-$114,000 in 2007 and $101,000-$116,000 for a partial contribution in 2008). For joint filers - up to $156,000 for 2007 and $159,000 for 2008 ($156,000-$166,000 in 2007 and $159,000-$169,000 in 2008 for a partial contribution in 2008).	No income limits.
What is the maximum annual contribution?	For 2008, $5,000, or 100% of employment compensation, whichever is less.
What is the amount for catch-up contributions?	Individuals age 50 or older (in the calendar year of their contribution) can contribute an additional $1,000.
Are contributions tax-deductible?	No.	Yes, subject to retirement plan participation status and AGI limits. Spouses not covered by a workplace plan have a higher deductible MAGI limit.
What are the federal tax advantages?	Tax-free growth.	Tax-deferred growth.
Can I withdraw without a penalty?	Roth IRA contributions can always be withdrawn at any time without penalty. For Roth earnings and Traditional IRAs, penalty-free withdrawals include but are not limited to: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments.
Is there a mandatory withdrawal age?	No.	Yes. Distributions must start at age 70½.

You can Move your Retirement Plan Assets

You can transfer assets (money or property) from other retirement programs (including traditional IRAs) to a traditional IRA tax free. For example, when you leave your employer you have the option to move your money from your retirement plan to an IRA. You can move your retirement plan assets in the following ways.

Rollovers
Transfers

Rollovers

You can receive a tax-free distribution from one retirement plan and contribute it to another retirement plan, including an IRA. The contribution to the second retirement plan is called a “rollover contribution.” You generally must rollover the distribution within 60 days, otherwise the distribution is taxable (and could be subject to a 10% penalty for early distribution).

You can roll over amounts from the following plans into a traditional IRA:

A traditional IRA,
An employer's qualified retirement plan for its employees,
A deferred compensation plan of a state or local government (section 457 plan), or
A tax-sheltered annuity plan (section 403 plan).

Transfers

A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Because there is no distribution to you, the transfer is tax free. Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers.

Transfers to Roth IRAs

Under certain conditions, you can move assets from a traditional IRA or from a Roth IRA to a Roth IRA.