CHICOPEE, Mass. (Mass Appeal) We all know that retirement can be expensive, but making a few key decisions can get you on the right track. With the tax deadline looming, Dylan Bond, Owner of Bond Financial Services came onto Mass Appeal to show us how we can set up our retirement accounts.
Bond Financial Services
175 Dwight Rd., Suite 301
“Are You Prepared for 40 Years Without a Paycheck?”
Upcoming Retirement Planning Seminars
Designed for people 50 and older with questions about retirement income planning.
Wednesday, May 7th &
Wednesday, April 30th
Twin Hills Country Club
700 Wolf Swamp Road, Longmeadow
For more information or to make a reservation call (413) 754-4747 or visit BondFinancialServices.net.
What Is a 401(k) Plan?
A 401(k) plan is a self-directed, qualified retirement plan established by an employer to provide future retirement benefits for employees. Employee contributions are made on a pre-tax basis, and employer contributions are often tax deductible.
If you elect to participate in a 401(k) plan, you can allocate a percentage of your salary to your plan every paycheck. The maximum annual contribution is $17,500 in 2014. If you will be 50 or older before the end of the tax year, you can contribute an additional $5,500. Contribution limits are indexed annually for inflation. The funds in your account will accumulate tax deferred until withdrawn, when they are taxed as ordinary income.
Generally, you must begin taking required minimum distributions from 401(k) plans no later than April 1 of the year after you reach age 70½. Distributions from regular 401(k) plans are taxed as ordinary income and may be subject to a 10% federal income tax penalty if withdrawn before age 59½, except in special circumstances such as disability or death.
What Is a Traditional IRA?
Traditional individual retirement accounts (IRAs) can be a good way to save for retirement. If you do not participate in an employer-sponsored retirement plan or would like to supplement that plan, a traditional IRA could work for you.
A traditional IRA is simply a tax-deferred savings account that has several investing options and is set up through an investment institution. For instance, an IRA can include stocks, bonds, mutual funds, cash equivalents, real estate, and other investment vehicles.
One of the benefits of a traditional IRA is the potential for tax-deductible contributions. In 2014, you may be eligible to make a tax-deductible contribution of up to $5,500 ($6,500 if you are 50 or older). Contribution limits are indexed annually for inflation.