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Losing your employer’s pension plan? Here are your options now

LLife doesn’t always go as planned because sometimes people lose their employer’s pension plan. Not knowing what to do can be paralyzing. But you can increase your knowledge by watching this video clip of Go behind the scenes of Motley Fool, recorded on January 6. In this piece, Fool contributor Charlene Rhinehart explains the various options workers have to save for retirement. And be sure to watch until the end to hear about an option that Charlene says offers a “triple tax benefit.”

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Charlene Rheinhart: So I see a question: “My employers have stopped the 401(k) match and discontinued the 401(k). I am in the process of transferring my 401(k) contributions to a rollover IRA. What options/alternatives to the 401 (k) do I have outside of my employer? I opened a Roth IRA last year.”

There are different options. You have your employer sponsored plans, you have your individual retirement plans such as a Roth IRA or a traditional IRA. When deciding between the Roth and the traditional, you think about future tax rates. Will I pay less tax now than I will pay in the future? Do I want to pay my tax bill in advance? That’s why people typically choose the Roth IRA because they want to pay their tax bill up front in exchange for tax-free income during retirement. These are your IRA options.

Now, if you have a business, you have other options. You can have a solo 401(k), simple IRA, SEP IRA. These are options if you have a business, and they allow you to contribute a little more than your traditional or Roth IRA. The traditional or Roth IRA is limited to $6,000 per year, if you are under age 50. Once you turn 50, you can add a $1,000 catch-up contribution to make up for any retirement savings you haven’t made in the past. The IRS allows you to contribute more.

But these are basic options. You review plans sponsored by your employer. If they don’t have 401(k) or any other plan, you’ll look at your traditional IRA or Roth IRA, then you’ll look at your other plans if you’re an entrepreneur.

And then don’t forget the HSA, a health savings account. It’s another way to invest, and some people use these funds to build their retirement portfolio because of the triple tax advantage. The money you invest is tax-free, the money grows tax-free, and you can withdraw the funds tax-free as long as the money is used to pay eligible medical expenses. These are a few options for you.

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