RETIREMENT PLANS AT 54FREEDOM

TRADITIONAL INDIVIDUAL RETIREMENT PLAN:

Individuals who receive compensation, including alimony, that is included in gross income and who are under the age of 70 1/2 may make contributions to the traditional individual retirement account (IRA). An IRA is a trust created for the exclusive benefit of an individual or his or her beneficiaries. Contributions to an IRA account may or may not be fully tax deductible. If the investor is not covered by a qualified plan or is covered but the income is below a threshold level, the contributions are pretax. If the investor is covered by another qualified plan or the income is above the threshold level, the investment must be after tax.

Annual contributions to the trust cannot be more than the earned income amount or $4,000 for 2007 and $5,000 for 2008, whichever is the greatest. An allowable catch-up for those who are age 50 or more may be made of $1,000 per year. Therefore, for an aged person (50 and over) the total investment into one’s IRA can be $6,000 for 2008. Payouts or withdrawals need to begin by April 1 the following year one reaches 70 ½ of age.

ROTH IRA PLAN:

Unlike the traditional IRA, contributions to the Roth IRA are never tax deductable. And one may be subject to a phase out rule depending upon income level. The investment guidelines are the same as the traditional IRA's. One major exception is any investment will be made with after tax dollars. That is funds leftover after paying any income taxes. The Roth plan does not have a requirement to begin withdrawals at age 70 1/2. Taxes will be paid on the investment earnings resulting from gains within the account and not to the amount your contribution(s).

SIMPLIFIED EMPLOYEE PENSION PLAN (SEP IRA):

Simplified employee pension plan are for the self-employed persons and small businesses. This plan would cover anyone with self employment income greater than $500 and over the age of 21. The maximum investment is limited to 25% of wages up to $46,000 (2008) or 20% of self employment income. Withdrawals need to begin at age 70 1/2. However, additional investments may still be made based upon earning.

GENERAL NOTES:

A retirement plan built around a guaranteed annuity can provide maximum protection. This investment could be tax deductible, if desired.

Retirement planning is a process with many rules. One needs to use a tax advisor or financial advisor to select the most appropriate method in order to secure your retirement.