Retirement 101 Income, needs, shortcomings

Joe Ruff

Feb. 13, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- Planning for retirement includes determining sources of income, estimating needs and shoring up shortcomings.

Key income can include Social Security, money invested through employer-sponsored retirement plans and even a part-time job, said Bob Jazwinski, chairman of the American Institute of Certified Public Accountants' personal financial specialist credential committee.

One source of information is the institute's free Web site at 360financialliteracy.org.

A few highlights:

--Social Security can play a big role, often replacing about 40 percent of an average wage earner's income during retirement.

--Employer-sponsored retirement plans often include employers matching some portion of contributions. They should be "your first choice when it comes to saving for retirement," said Jazwinski, who is based in Hermitage, Pa. Such plans include 401(k)s, which allow tax-deferred contributions, and Roth 401(k)s, which allow after-tax contributions to be withdrawn tax-free.

--Investment retirement accounts, such as traditional IRAs, offer investors the opportunity to lower their taxable income through deductible contributions. Withdrawals, however, can be taxed. Roth IRAs don't permit tax-deductible contributions, but they do allow tax-free withdrawals.

--Annuities generally are funded with after-tax dollars, but their earnings are tax-deferred, with taxes paid on the portion of distributions that represent earnings. A typical annuity provides income payments beginning at some future time, usually retirement. Payments may last for the holder's life, for the joint life of that person and a beneficiary, or for a specified number of years. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company.

--Contact the writer: 444-1117, joe.ruff@owh.com

Newstex ID: KRTB-0149-31756119