reduces the risk of impulsive or unwise spending that
will threaten your savings plan — out of sight, out
of mind. If possible, save more than you think you’ll
need to provide a cushion.
Understand your investment options
You need to understand the types of investments
that are available, and decide which ones are right for
you. If you don’t have the time, energy, or inclination
to do this yourself, hire a financial professional. He or
she will explain the options that are available to you,
and will assist you in selecting investments that are
appropriate for your goals, risk tolerance, and time
horizon. Note that many investments may involve the
risk of loss of principal.
Use the right savings tools
The following are among the most common retire-
ment savings tools, but others are also available.
Employer-sponsored retirement plans that allow
employee deferrals (like 401(k), 403(b), SIMPLE, and
457(b) plans) are powerful savings tools. Your contri-
butions come out of your salary as pre-tax contribu-
tions (reducing your current taxable income) and any
investment earnings are tax deferred until withdrawn.
These plans often include employer-matching contri-
butions and should be your first choice when it comes
to saving for retirement. 401(k), 403(b) and 457(b)
plans can also allow after-tax Roth contributions.
While Roth contributions don’t offer an immediate tax
benefit, qualified distributions from your Roth account
are free of federal, and possibly state, income tax.
IRAs, like employer-sponsored retirement plans,
feature tax deferral of earnings. If you are eligible,
traditional IRAs may enable you to lower your cur-
rent taxable income through deductible contributions.
Withdrawals, however, are taxable as ordinary income
(unless you’ve made nondeductible contributions, in
which case a portion of the withdrawals will not be
taxable).
Roth IRAs don’t permit tax-deductible contributions
but allow you to make completely tax-free withdraw-
als under certain conditions. With both types, you can
typically choose from a wide range of investments to
fund your IRA.
Annuities are contracts issued by insurance com-
panies. Annuities are generally funded with after-tax
dollars, but their earnings are tax deferred (you pay
tax on the portion of distributions that represents
earnings). There is generally no annual limit on con-
tributions to an annuity. A typical annuity provides
income payments beginning at some future time,
usually retirement. The payments may last for your
life, for the joint life of you and a beneficiary, or for
a specified number of years (guarantees are subject
to the claims-paying ability of the issuing insurance
company). Annuities may be subject to certain charges
and expenses, including mortality charges, surrender
charges, administrative fees, and other charges.
Note: In addition to any income taxes owed, a 10
percent premature distribution penalty tax may apply
to taxable distributions made from employer-spon-
sored retirement plans, IRAs, and annuities prior to
age 59½, unless an exception applies.
• John McRae, branch manager for Citizens National
Bank, is senior financial advisor for Raymond James
Financial Services, a division of Citizens.
1. Calculated form Consumer Price Index (CPI-
U) data published by the Bureau of Labor Statistics,
January 2019
Disclosure
The information contained in this report does not
purport to be a complete description of the securities,
markets, or developments referred to in this mate-
rial. Investments mentioned may not be suitable for
all investors. The material is general in nature. Past
performance may not be indicative of future results.
Raymond James Financial Services, Inc. does not pro-
vide advice on tax, legal or mortgage issues. These
matters should be discussed with the appropriate pro-
fessional.
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