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IRAs, 401(k)s and More: Making Sense of the Alphabet Soup of Retirement Accounts

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From the FDIC

Consumers and small business owners are fortunate to have a variety of retirement savings opportunities available to them — from IRAs and SEPs to 401(k)s and 403(b)s — that can be used to save for retirement and save on some taxes.

These options are especially important now that traditional pensions and other employer-funded retirement plans have become increasingly rare. One big challenge, though, is determining which retirement savings vehicles may be right for you.

While the FDIC can’t advise you on where to put your money, we can help you understand the basic characteristics of different types of retirement options available from banks and other institutions so that you, perhaps in consultation with a financial or tax advisor, can make the right choices.

  • Tax-deferred retirement plans, which include traditional Individual Retirement Accounts (IRAs) and employer-sponsored 401(k)s, allow you to reduce your taxable income by the amount of the deposits or investments made each year. Tax-deferred retirement accounts may be best suited for people who anticipate their income tax rate will be lower after retirement than before retirement.

  • After-tax retirement plans, which include Roth IRAs and employer-sponsored Roth 401(k)s, enable a consumer to make contributions using after-tax dollars. This means the consumer has already paid income taxes on the funds that will be used for the deposits or investments.

Learn more about retirement savings and protections from the FDIC.

Getting started with an IRA? Roth or traditional plans help you save for retirement. 

WATCH: What are Social Security credits and why do you need to earn them? 

The State of Older Americans and Saving

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By Katie Bryan, America Saves Communications Manager

The numbers are shocking.

  • In 2012, the average credit card debt among adults aged 65+ was $9,283 (Demos).

  • One-third of senior households has no money left over each month or is in debt after meeting essential expenses (Institute on Assets and Social Policy).

  • The share of Americans 65 and older in the labor force went from 12.1 percent in 1990 to 16.1 percent in 2010 (Census).

  • 60 percent of women over 65 across the country lack the incomes to meet basic expenses (Wider Opportunities for Women).

America Saves is stressing the need for all Americans to save for their future. With Americans, especially women, living longer – the reality is that Americans need to save more money for retirement or to work longer.

Tips to Prepare to Live Debt Free in Retirement

  1. Start saving, keep saving, and stick to your goals

  2. Know how much you will need for retirement

  3. Save at work and/or through a Roth IRA

  4. Find places to cut back so you can save more

Already Retired and Need Help: You Gave, Now Save

Millions of low-income seniors continue to miss out on nearly $1.2 billion in benefits (PDF) that can help them pay for their health care, prescriptions, food, utilities, and more. These aren’t handouts—by working hard their whole lives, older adults have paid into the programs that can now provide them support needed to remain healthy and independent.

  • BenefitsCheckUp —a service of the National Council on Aging (NCOA)—is the nation’s most comprehensive web-based service offering information on benefits programs, specifically programs for people with Medicare and limited income and resources.

  • The Eldercare Locator, a public service of AoA and administered by n4a, is a nationwide service that connects older adults and their caregivers with information on senior services. The Locator is available both online Eldercare.gov and as a toll-free hotline at 1-800-677-1116.