Retirement Day

The magic time has arrived. Your old enough to stop working and retire which is defined when you have time, money and health. The amount of benefit is hard to pin down. There are defined benefit plans(union plans, government pensions), 401 (k), ESOP, and 403 (b) just to name a few.

401 (k) retirement plan for profit making companies are a combination of your money and employer matching money which says you can have all the money usually after five years of employment. You should transfer the balance to your own IRA , either an annuity or mutual fund and make withdrawals as needed. All withdrawals are taxable.

(E) ployee (S)tock (O)ption (Trust) is a retirement plan based on length of employment, position, and profits of the company. Your balance of the trust is available when you stop working and should be rolled over into your own investment account. All withdrawals are taxable.

403 (b) retirement plan for non-profit companies which in most cases the contributions are made by the employee by payroll deduction but can have matching fund from the employer. The withdrawals are all taxable and are usually in the investment vehicle chosen by you and is fully vested from the beginning.

Define benefit plans are calculated by the pension plans to determined you monthly payment.The usual scenario is the human resources department or pension trustee will call you into the office and ask you what option you want to take? So you ask yourself, what is he/she talking about? (1) Life income option is the maximum amount and you will receive this amount for your life then it ends. (2) Life with 50% survivor which means you will receive a lessor amount but your spouse will receive half that amount for the spouse's life then is ends. (3)Life and 75% survivor which is a lessor amount now and 75% for spouse for life. These are the most common choices. Some of these plans have cost of living adjustments but usually only on governmental plans.

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