Retirement education
Knowledge is power. Understanding some basic information about saving and investing can help you have confidence in establishing a retirement savings program.
403(b) retirement plan
A 403(b) is a retirement plan set up by your employer that allows you to set aside money for retirement on a pre-tax basis through salary reduction. Your premium contributions into a 403(b) plan and any earnings can grow tax-deferred until you make a withdrawal, presumably at retirement.
Contributions and investment earnings in a 403(b) plan are tax-deferred until distributed, presumably at retirement, at which time they are taxed as ordinary income. A 403(b) plan may also offer a designated Roth account. Contributions to a Roth account are taxed currently and if certain conditions are met, earnings will be taken tax-free when distributed.While most teachers receive a pension from their school upon retirement, the money from a pension typically does not equate to their salaries. Putting money into a 403(b) before retirement can help offset the difference between your current salary and the amount you receive from a pension.
Benefits of a 403(b):
- Contributions through payroll reductions reduce your current taxable income.
- Higher payment limits than Individual Retirement Account (IRAs).
- Income taxes are deferred until withdrawal at retirement.
- Disciplined retirement planning through regular payroll reduction.
457(b) retirement plan
A 457(b) is a retirement plan available to employees of state and local government agencies and entities tax-exempt under section 501(c) of the Internal Revenue Code. Check with your employer to see if they offer a 457(b) plan.
The Internal Revenue Code allows funds for 457(b) plans to be invested in annuities and mutual fund custodial accounts.
Benefits of a 457(b):
- Contributions through payroll reduction reduce your current taxable income (except Roth contributions).
- Higher annual contribution limits than Individual Retirement Accounts (IRAs).
- Income taxes are deferred until withdrawal at retirement.
- Creates a disciplined approach to retirement planning through regular payroll reduction.
Individual Retirement Accounts (IRAs)
Similar to other retirement plans, IRAs have annual contribution limits. The annual contribution limits for IRAs are significantly lower than 403(b) or 457(b) plans. Your total contributions to Roth and traditional IRAs may not exceed the limit established by the IRS for that year.
tax-deferred and contributions are not tax-deductible. In addition, if certain conditions are met, the earnings will be tax-free. To establish a Roth IRA, you must meet income eligibility requirements.
Roth IRAs have annual contribution limits that are the same as traditional IRAs. Your total contributions to Roth and traditional IRAs may not exceed the limit established by the IRS for that year.
Annuities
Horace Mann offers a variety of annuity products designed to meet different needs, many of which can provide tax-deferred growth. The right annuity for you depends on your retirement income and goals. This annuity could have a fixed rate, enable you to invest in the market, or only require one payment.
- Annuities are retirement products that can help provide a steady, guaranteed stream of income in retirement. You can contribute to an annuity alongside any contributions you make to a 401(k), IRA, or pension.
- An annuity is a contract between an investor and an insurance company. The insurance company promises to make periodic contributions . These contributions are in exchange for the premiums that the investor pays.
- Annuities may be immediate or deferred. With an immediate annuity, you (or a payee) begin to receive income shortly after the initial payment. Deferred annuity payouts don’t begin until a future date.
Annuities fall into one of two broad categories: qualified and non-qualified annuities. Payouts are taxed differently.