No matter what age you are there's no better time than right now to plan for your retirement. Saving for retirement often gets put off as we deal with life's more pressing demands but each month you delay cuts significantly into the total savings you have when that day comes. Save early. Save often.
To get the most out of your retirement savings, you should figure out where you want to be and how you're going to get there. Since people are living longer than ever, retirement savings need to last longer and work harder. This page will lead you to resources that can help educate you about various retirement terms, products and options.
Annuities are financial contracts with an insurance company that provide a regular income at retirement. A deferred annuity allows you to contribute money now for use later. You are not allowed to touch this money until you reach the age of 59. When you reach retirement age, the money you have built up in your annuity will provide you regular income payments throughout your retirement.
An immediate annuity skips the step of making regular payments into an annuity fund. If you have a large sum of money, you can invest this in an annuity and receive regular payments throughout retirement.
There are no limits on how much you can contribute to an annuity. Unlike retirement accounts, the money you contribute is not tax-deductible, but the earnings on the funds are tax-deferred until you withdraw them.
Learn more Annuities, a guide for consumers
Whole life insurance is different from term life insurance in that it's an investment. With every premium you pay, you are creating cash value in the policy. Whole life insurance can be considered a retirement investment because you can withdraw money from this account when you retire. If you cash in the policy, you'll pay tax on the difference between what you receive and the premiums you've paid. If you borrow against the cash value of the policy, you won't be taxed on what you borrow, but you'll have to pay interest at a fixed rate on the loan.
Learn more Life Insurance a guide for consumers
An Individual Retirement Account (IRA) provides investors with tax benefits for retirement savings. You can contribute each year up to the maximum amount allowed by the Internal Revenue Service (IRS).
Traditional IRA contributions typically are tax-deductible. You pay no taxes on IRA earnings until retirement, when withdrawals are taxed as income.
Roth IRA contributions are made with after-tax funds and are not tax-deductible, but earnings and withdrawals are tax-free.
Simplified Employee Pension (SEP) IRA
Simplified Employee Pension Plans allow an employer, typically a small business or self-employed individual, to make retirement plan contributions into a traditional IRA established in an employee's name.
Learn more SEP RETIREMENT PLANS for Small Businesses
Savings Incentive Match Plan for Employees (SIMPLE) IRA
SIMPLE IRA plans are available to small businesses that do not have any other retirement savings plan and allows employer and employee contributions, similar to a 401(k) plan, but with simpler, less costly administration, and lower contribution limits.
Learn more SIMPLE IRA PLANS for Small Businesses
Your employer's sponsored retirement savings plan is an essential part of your future financial security. It is important to understand how your plan works and what benefits you will receive. Just as you would keep track of money that you put in a bank or other financial institutions, it is in your best interest to keep track of your retirement benefits.
Health care planning in retirement is essential. Medicare is the federal health insurance program for:
- People who are 65 or older
- Certain younger people with disabilities
- People with End-Stage Renal Disease
(permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)
Some portions of Medicare are free and others cost money, with premiums typically deducted from your Social Security benefit checks.
Even if you have private insurance you should apply for Medicare. If you wait until after your 65th birthday to apply, you may end up paying a late penalty or higher premiums. For most people, the initial enrollment period is the seven-month period that begins three months before the month in which they turn 65. If you miss that window, you may enroll between January 1 and March 31 each year, although your coverage won't begin until July 1.
Medicare Part A - Hospital Insurance
Part A helps cover inpatient hospital stays, skilled nursing facility care, hospice care, and some health care.
Medicare Part B - Medical Insurance
Part B helps cover services from doctors and other health care providers, outpatient care, home health care, durable medical equipment (like wheelchairs, walkers, hospital beds, and other equipment, many preventive services (like screenings, shots or vaccines, and yearly "wellness" visits.
Part A and Part B are considered Original Medicare.
Medicare Part C - Medicare Advantage Plan
Medicare Part C plans provide an alternative to traditional Part A and B coverage. They are offered by private, Medicare-approved companies. To be eligible for Part C coverage, you must already have both Medicare Parts A and B. Medicare Advantage Plans also often include drug coverage (Part D).
Medicare Part D - Prescription Coverage
Part D helps cover the cost of prescription drugs, including many recommended shots or vaccines. You join a Medicare drug plan in addition to Original Medicare, or you get it by joining a Medicare Advantage Plan (Part C) with drug coverage. Plans that offer Medicare drug coverage are run by private insurance companies that follow rules set by Medicare.
There may be dozens of plans available to you, depending on where you live. For help finding the options available in your area, click here.
Medigap, also called Medicare Supplement Insurance, is private health insurance that is designed to supplement original Medicare benefits. It differs from Medicare Advantage Plans in that it is not a way to get Medicare benefits, but to fill in the gaps in your Medicare coverage.
Resources for Medicare
Understanding and choosing the right Medicare options for your individual situation can be a complicated and time-consuming process. For assistance, call 1-800-633-4227 or visit Medicare.gov, where you'll find:
- Helpful publications, including "Medicare & You," a highly detailed guide that explains Medicare in easy-to-understand language.
- Tools to compare prescription drug plans, hospitals, nursing homes, home health agencies and Medigap plans in your area
- A resource to find local doctors and other health practitioners who participate in Medicare
- Services covered by various Medicare plans
- Enrollment instructions
Medicaid is a joint state and federal program that assists with the medical costs of some people with limited incomes who meet certain eligibility requirements. Find out about the requirements and how to apply for Medicaid in your state.
The United States Social Security Program, started in 1935, is meant to provide supplemental support for retired or disabled persons in the United States.
How It Works
Unless you were employed by an agency that opted out of the Social Security system, every paycheck you've earned throughout your life has had Social Security tax taken out of it. This money isn't reserved for you when you retire. It's put into a large fund from which current Social Security benefits are paid. But your tax isn't being taken in vain. You receive Social Security credit for your tax. You need to have been employed for at least 40 quarters under Social Security to be eligible for Social Security benefits when you retire.
Social Security Updates
All workers who are over the age of 25 who are not yet receiving Social Security benefits receive yearly statements from the Social Security Administration. These statements contain your earnings over the years as well as estimates for your Social Security retirement, disability and survivor's benefits. Check these statements carefully to make sure you are getting credit for all of your earnings. Errors could affect your benefits.
When You Are Eligible
The soonest you can receive Social Security retirement benefits is at age 62. But if you delay receiving benefits until a few years later, your benefit amount will be greater. This decision should be based on your financial position - do you need the money or can you wait until your benefits reach their full potential? No matter when you choose to start collecting benefits, you must sign up three months in advance of when you actually want to receive your first check.
Learn more Social Security Administration
When looking into retirement options it may feel as if financial advisors are speaking a different language at times. To help, we have compiled a glossary of key financial terms that may help you cut through some of the clutter.
The amount of benefit will be provided to a participant in a defined benefit plan when that participant reaches the normal retirement age.
Annual Minimum Contributions
The amount an employer must contribute to the retirement plan on behalf of an employee, which varies depending on the type of plan.
An individual who receives payment from an annuity.
A contract or agreement with an insurance or investment company that provides a source of income or series of payments from the investment, either now or at a set future date, such as retirement.
A financial statement that is divided into three major parts: assets, liabilities, and shareholder's equity.
An amount usually representing the actual cost of an investment to the buyer. The basis amount is important in calculating capital gains and losses, depreciation, and other income tax calculations.
The person who is designated to receive the benefits of a contract.
The amount and method of payment a plan will pay to an employee or his or her beneficiary upon the occurrence of some event described in the plan, like retirement, disability of death.
Plans that allow employees to contribute to their own retirement may permit employees age 50 or older at the end of the calendar year to make additional (catch-up) contributions to plans. Amount of the catch-up contributions depend on the type of plan.
The law limits the amount that can be contributed annually to a plan for an employee. The limits differ depending upon the type of plan and upon whether it is the employer or the employee who is contributing.
The law requires an employer who has a retirement plan to enroll employees who meet certain requirements. The eligibility requirements vary by type of plan. An employer may use less restrictive eligibility requirements than those legally required.
The law requires certain plans to meet annual tests to ensure that plans do not disproportionately benefit the business’ owners and highly compensated employees.
A deferred annuity is established by paying one or more premiums over a period of time and allows assets to grow tax-deferred before being converted to payments.
Although certain terms for retirement plans are legally required, an employer can have other optional terms and provisions permitted for that type of plan.
Money deposited by an employer into the plan for the benefit of plan participants.
An equity-indexed annuity, either immediate or deferred, earns interest or provides benefits that are linked to an external equity index, such as Standard and Poor's 500 Composite Stock Price Index.
Final average pay
A number of months or years, as specified in a defined benefit plan, used to determine an employee’s average salary, which in turn determines the amount of benefits the participant will receive.
Certain plans may allow employees to withdraw money from the plan while still employed to relieve an immediate and heavy financial need of the employee, dependent or beneficiary. Amount withdrawn can't be more than necessary to satisfy the financial need.
Highly compensated employees
An individual who owned more than 5% of the employer business at any time during the year or the preceding year or received compensation for the preceding year of more than an annually adjusted amount.
Generally, for 403(b) and 457(b) plans, this is the amount of includible income and benefits that a participant receives from the employer who maintains the retirement plan and that must be included in the participant's income.
If permitted by the plan, amount that an employee may borrow from the plan but must repay along with stated interest.
The amount an employer deposits to the plan for a plan participant that equals some portion (usually percentage) of an employee's contributions.
Generally means running the plan in accordance with its written terms, filing any required returns, performing required tests and updating the plan so that it conforms to any changes in the law.
The amount an employee chooses to have the employer deduct from his or her wages to deposit to a retirement plan.
The plan document, for some types of plans, sold by institutions or practitioners that has been approved in form by the IRS as meeting that plan type's basic legal requirements.
The extension or transfer of a debt or other financial arrangement. A rollover may entail a number of actions but often refers to the transfer of the holdings of one retirement plan to another without having to pay taxes.
The amount an employee can choose to have the employer deduct from his or her pay for contribution into a retirement plan that permits employee contributions. The amount an employee can defer varies by type of plan and is subject to annual limits.
The process to establish a plan. Generally adopting a plan document (model form, pre-approved or individually drafted) and setting up an account(s) or trust to receive deposited money. 403(b) plans require written program but not a single plan document.
The portion of retirement benefits owned by the employee and no longer at risk of being forfeited. Plan must state the yearly percentage the employee is vested in his or her retirement benefits. Employee contributions must be immediately vested.
- Financial Planning Association
- American Institute of Certified Public Accountants
- Florida Deferred Compensation
- USA.gov - Retirement
- Social Security
- US Department of Labor – Retirement Planning
- US Department of Labor – Saving Matters
- National Institute on Retirement Security
- Savings Resources by Life Stage - ASEC
With any large financial decision, it is important to do your own research. You need a general knowledge of financial products so you can make informed decisions. It may be a good idea to consult with a financial planner for advice. Before you do, make sure you know your financial adviser. This guide from the Consumer Financial Protection Bureau can help you ask the right questions so you can find a knowledgeable and trustworthy financial adviser. You can find out facts about an investment professional’s background at the Florida Office of Regulation’s website.