Taking A Good Look At Your Retirement Funds

Retired people have many possible avenues of income. Listed below is a summary of the various kinds of retirement funds available for retirees who prepare. Today retirement plans that generate retirement funds are big business. Retirement plans are available for sole proprietors. Self employed people, owner-employees and small business owners can set up a tax advantaged retirement plan for them and their employees.

The SEP – IRA is one plan that uses an employer's present money to generate retirement funds. Self employed individuals as well as small businesses can take advantage of the SEP- IRA. SEP stands for simplified employee pension. It allows individuals to contribute towards their and employees pensions in a simplified manner.

Eligibility for participation in the SEP – IRA retirement funds program – the individual must be at least 21 years of age. He should have worked with you for three of the last 5 years. He should have drawn at least $450 in income for the year. Contribution limits are the lesser of 25% of the employee's total compensation and $45,000. The SEP-IRA is easy to set up and operate. Investment earnings grow tax deferred. You are not locked into contributing each year. All types of corporations can set up SEP. It has low administrative costs.

An individual account for each participant is provided by defined contribution plans. The amount contributed and income, expenses, gains and losses influence the benefits. Some examples of these plans are employee stock ownership plans, 401(k) plans, 403 (b) plans as well as profit sharing plans. These plans have certain advantages. The tax deferred retirement savings are medium. There is a certain degree of flexibility on how much the participants can save. It is easily understood. Participants can benefit from good investment performance. It can be funded through payroll deductions. It is difficult to build a fund for late entrants and participants bear investment risk.

A defined benefit retirement plan is one of those retirement funds that offers a benefit amount at retirement often stated as an exact amount per month. A formula taking into account the participant's salary and service can be used to calculate benefit accruing to the retirement fund. The advantages of a defined benefit retirement plan to the retirement fund are as follows. There is guaranteed retirement income with no investment risk. It is not dependent on the participant's ability to save. However on the flip side, it is difficult to understand and not beneficial to employees who leave before retirement

Employer matching contributions are a retirement plan that must be taken advantage of. If the employer matches contributions there is a 100% growth in savings in one day. If the employer only matches a percentage of employee contribution, you should still take advantage of this plan.

The Series EE savings bonds are possibly another great retirement fund. All such bonds issued after May 1, 2005 will earn a fixed interest rate throughout the 30 year life of the bond. The present interest rate through October 2007 is 3.4%. The bonds must be held for at least one year and bonds held for less that 5 years will attract a 3 month interest penalty. The bonds are guaranteed to double in value in 20 years.

The above was a summary of some of the retirement funds plans available. Choose a retirement plan wisely to live out that dream retirement.