Saving for Retirement Presentation By: Justin Stone

Break down which retirement accounts make the most sense. Your main vehicles for retirement savings will likely be an IRA along with a 401(k). If your 401(k) offers a matching contribution.

Getting Started Recognizing the need to save for retirement is the first step!!!! That's followed by prudent retirement planning, which includes figuring out when you'd like to retire, how much you'd like to spend, and how much you need to save and invest NOW to get there.

Retirement Vehicles Your main vehicles… IRA, 401(k), 403(b), 457, or another qualified plan depending upon your workplace. If you have "Earned Income" but your employer doesn't offer a retirement plan, you can always start by putting money in a traditional IRA or Roth IRA. But if you also have access to a 401(k) or other employer plan, should you fund your 401(k), your IRA or both? The best choice is to fund your tax-advantaged options to the fullest if you're eligible, then move on to other ways to save. But what if you can't afford to save that much?

Got a Match? If your 401(k) offers a matching contribution, that's usually the best place to start. Why give up free money? Ex. If you're able to save more than your employer will match, should you put the rest into your 401(k)? Or should you consider a traditional IRA or Roth IRA?

IRA vs. Roth IRA Money you put in a traditional IRA is generally tax- deductible no matter how high your adjusted gross income (AGI) might be. IRA contribution is fully deductible for single filers with a Modified AGI of $58,000 or below. For married couples filing jointly, the phase-out range for deductibility is between $92,000–$112,000

IRA vs. Roth IRA Contributions to a Roth IRA are never tax-deductible, but qualified withdrawals are tax-free. You can contribute the maximum to a Roth IRA if your AGI is at or below $110,000 for single filers and $173,000 for married couples filing jointly. You can make a partial contribution if your AGI is between $110,000–$125,000 for singles and $173,000– $183,000 for married couples.

IRA vs. Roth IRA If you're eligible to make a deductible contribution to a traditional IRA, consider putting your next $5,000 there You're still getting a pretax deduction as you do with your 401(k), but you'll likely have more investment choices. If you can afford to save more after contributing $5,000 to a traditional IRA then continue with your 401(k) up to the maximum.

IRA vs. Roth IRA If you're not eligible to make a deductible contribution to a traditional IRA but you're eligible for a Roth IRA, consider putting your next $5,000 into a Roth. Your contribution won't be deductible, but qualified withdrawals will be tax-free down the road.

IRA vs. Roth IRA A Roth IRA doesn't force you to take required minimum distributions at age 70½. That's an advantage in terms of letting your Roth IRA continue to grow. It could also benefit your heirs, who'd be able take money out income tax-free after you're gone.

IRA vs. Roth IRA Again, if you're able to save more after you put $5,000 in a Roth, continue with your 401(k) until you max it out. If you're eligible for neither a deductible contribution to a traditional IRA nor a Roth IRA contribution, then just continue with your 401(k) until you've contributed the maximum.

The Roth 401(k) A "Roth 401(k)" account works like a regular Roth. Contributions come from after-tax dollars and qualified withdrawals are income tax-free. There is no income limit to participate!

The Roth 401(k) Eligible employees can contribute to either the traditional 401(k) or the Roth 401(k), up to the limit of $17,000 per individual. Also, the balance from a Roth 401(k) could be rolled over directly into a regular Roth IRA when you leave the employer.

The Roth 401(k) The choice of a Roth 401(k) could make sense if you think your tax bracket will be the same or higher in retirement. If that's the case, then maxing out on a Roth 401(k) and then contributing to a Roth IRA, if eligible, might be the way to go.

The Roth 401(k) If you're in a lower bracket when you retire then a traditional 401(k) would have been a better bet. One way to hedge against the unknown is to split your contributions between the traditional option and the Roth option.

Example Using the 2012 Limits Your salary is $110,000. Your goal is to save 20%, or $22,000. Your employer matches your 401(k) contributions, up to the first 6% of your salary ($6,600). 1. First $6,600 to 401(k) 2. Next $5,000 to a Roth IRA (since you are not eligible for a deductible contribution to a traditional IRA) 3. Next $10,400 to 401(k) In this case, you're able to contribute the full $17,000 limit to your 401(k) and the full $5,000 limit to a Roth IRA.

The Roth 401(k) If the amount you're able to contribute to an IRA and 401(k) each year is less than the maximum, you would follow the order until you reach your personal savings limit. Once you set your savings percentage, you're on "pay yourself first" autopilot. Since you have a greater opportunity to spend money earmarked for your IRA, you need to be more disciplined about saving it

What if I've maxed out my 401(k) and IRA? If you've maxed out your 401(k) and whatever IRA option makes the most sense, and you're still looking to save more. Here's where to go with those extra retirement dollars:

Regular Brokerage Account. Additional retirement savings can go right into your brokerage account. What's more, you may be able to add value by placing more tax-efficient investments in your taxable accounts and less tax-efficient investments in your tax- advantaged accounts.

Nondeductible contribution to a traditional IRA. Even if you're covered by an employer plan and you're above the AGI limit for a Roth IRA or a deductible contribution to a traditional IRA, you can still make a nondeductible contribution to a traditional IRA. Whether you should or not is a tough call. Besides no up-front deduction, any earnings will be taxed as ordinary income when you withdraw them. The advantage rests solely on the benefit of tax- deferred compounding.

Nondeductible contribution to a traditional IRA. But you could effectively defer taxes on stocks in your taxable accounts by trading infrequently or buying an index fund. If you're in a higher tax bracket and you want to hold bonds in your taxable account, you could always buy municipal bonds, which are tax-free.

Deferred Variable Annuities This option has some similarities to a nondeductible IRA contribution with some notable differences: Most deferred variable annuities have an optional death benefit, so your heirs would at least be sure to get what you put in, even if your investments lose value. There are no required minimum distributions to deal with.

Deferred Variable Annuities You have the option to annuitize your balance. Some deferred variable annuities provide a guaranteed lifetime withdrawal benefit. The additional downside here, is that variable annuities typically include additional costs and fees.

The Bottom Line If you haven't begun to save for retirement, or you're saving less than you should—What are you waiting for? Now that you know which retirement accounts make the most sense, start filling them up!