Kevin Kibicho

Retirement can sneak up on you. It can be a daunting reality. Nevertheless, it has to be faced head on. It may be exacerbated if you don't have savings to live off of. It is therefore essential that you have your finances in order in preparation for that dreaded day. On the other hand, you could be waiting for it with delight knowing you're covered. It really is your choice. Americans are not reaching the recommended 4X annual salary retirement savings plan. This post will enlighten you on retirement plans you can pick up to make you stay ahead of the curve. 1. 401(k) This classic type is the most adopted employer sponsored retirement plan in the USA. Basically, an employee is given an option to pick compensation in cash or defer a percentage of it to a 401 (k) account incorporated in the plan. It is a defined contribution plan which loosely translates to mean that the account holder's financial position is determined by how much has been chipped in and how the investments perform. Although not obligated by law to contribute, most firms opt to match their employees' contributions up to a set percentage and/or contribute under a profit sharing feature. Currently, the maximum contribution allowable is $19,000. For people aged 50 and above, you can make additional contributions to catch up, up to $6,000 summing up to $25,000. 2. Roth IRA This is an individual retirement plan suitable for those with a cavalier streak when it comes to investing. This is because it has less restrictions on the potential investment ventures than its tax-advantaged counterparts. It is much like a traditional IRA except for the fact that in Roth IRA contributions, they're not tax-deductible. This is to say that they're funded with after-tax dollars. The contribution limit stands at $6,000 for workers 49 years and below and $7,000 for workers 50 years and above. You can start contributing to a Roth IRA as long as you're of lega age. It has less stringent rules on early withdrawals. To get the most out of it though, you must have accumulated a substantial amount of income. 3. Solo 401 (k) This is a retirement plan for a sole proprietor with no employees. It also covers one who is working with a spouse. Not only will you be getting greater limits than most employer plans but also a wider range of investment opportunities. Most are pretty much straightforward and you can reduce the hassle by opening one in your brokerage institution. While you're at it, you can award yourself a decent profit-sharing ratio, play around and defer your earnings. You are an employee of yourself after all. The maximum elective deferral is $19,000 and $25,000 if you're 50 or older. For the employer limits, these amount to $56,000 or $62,000 with catch up contributions considered. 4. Health Savings Account (HSA) While not a retirement plan per se, you can leverage its useful features to save up for your retirement. To open a HSA, all that is required is for you to have a high-deductible health care plan (HDHP). Deductible is the amount you incur before the insurance company pays up. To qualify for this plan, the minimum deductible has to be $1,350 for one person and $2,700 for a household. Furthermore, a HDHP's costs that aren't reimbursed by the Insurance company can't be greater than $6,650 for one person or 13,300 for a household. If you're sickly and visit the doctor a lot, you might want to stay away from this plan as those deductibles could catch up with you, compounding your situation further. The maximum contributions are $3,500 and $7,000 for individuals and households respectively. Maximum catch-up contributions for people 55 and older remains at $1,000. Withdrawing early for qualified medical expenses is allowed tax-free. Retrieving funds for anything other than medical expenses before reaching 65 attracts a 20% penalty. After attaining age 65, you can then withdraw for expenses other than medical however, it'll be subject to income tax. Other than that, you can put in your pre-tax dollars and watch that fortune grow tax-deferred over a lengthy period. Whereas the HSA should not be the be-all end-all in your retirement plan journey, it can provide a much needed boost to your pre-existing retirement plans. Retirement may make people feel old and unwanted. It is imperative that you cushion yourself for when that time may come. And money can do that for you. Having some dollars in your pocket will make life easier, somewhat. It's never too early to start saving and you can take these four into consideration when planning for your retirement.