Home Other Retirement Planning Understanding Other Retirement Planning

Understanding Other Retirement Planning

Understanding Other Retirement Planning

When planning for retirement there many things that someone must take into account in order to be prepared. The most important factor is having enough money to live comfortably in retirement. Through the Internal Revenue Service (IRS), employers, and financial institutions there exist many options to effectively plan for one’s retirement. 

Several options include retirement funds like a 401(k) or an individual retirement account. In addition, on may receive tax relief due to provisions in the Internal Revenue Code regarding federal gift taxes and deductions and credits that apply for senior citizens. Each of the options listed below has its benefits and detriments, but they exist to help people save money once they reach full retirement age.

401(k) Plans

A 401(k) plan is a retirement option that is offered through employers to help employees save money for retirement. The name is derived from the section in the Internal Revenue Code that applies to this type of retirement plan. Employees make contributions to these funds through pre-tax dollars deducted from their monthly wages. Employers can also make contributions through matching percentages based on the income of the employee. 

The Internal Revenue Code outlines provisions that affect distributions, or withdrawals, from a 401(k) plan as well as other plans similar to this type of plan that employers can offer. Plans similar to a 401(k) include Roth 401(k) plans and 457 plans. Roth 401(k) plans were only made available through legislation passed in 2006. This type of plan allows both pre-tax and post-tax dollars to be deposited into the retirement fund. A 457 plan is a retirement plan that can be offered by government and non-profit agencies.

Individual Retirement Accounts

Individual retirement accounts, or IRAs, are retirement funds that can be created through a financial institution to allow the account holder to save for retirement. IRAs come in many forms but each one allows income to be deferred until the account holder has reached retirement age. Most IRAs can be invested in certificates of deposit (CODs) or in stocks and mutual funds. This allows the account to grown and gain interest in addition to the contributions made by the account holder.

The types of IRAs that are available traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. Traditional IRAs are the standard form of IRA that was created in 1975 by the Employee Retirement Income Security Act of 1974 (ERISA). Roth IRAs are a modified form of IRA that allow for expanded diversity and tax provisions. SEP IRAs are retirement funds that are available to small businesses and the self-employed to help save money for retirement. SEP IRAs are established through traditional IRAs. SIMPLE IRAs are incentive based retirement plans that require employers to contribute to an employee’s retirement fund annually.


Rollovers are a method of transferring the funds of a retirement plan into another retirement fund. Rollovers tend to occur when someone changes employment or retires. This allows for that person to have their retirement money move with them to be diversified and grow. What makes rollovers different from a direct transfer is that rollovers are reported to the IRS to be monitored and tracked. As such, rollovers come with special stipulations that include time constraints and value tracking.

The most common forms of rollovers are 401(k) rollovers and IRA rollovers. 401(k) rollovers generally occur when a 401(k) plan is converted into an IRA. IRA rollovers occur when the account holder transfers the funds into another IRA or has the IRA converted into a Roth IRA.

Gift Taxes

Gift taxes are federal taxes that apply to any gratuitous transfer of property between a donor and a donee (recipient). A gratuitous gift is one that exceeds monetary limitations which are established by the IRS. These taxes are paid by the donor and are separate from income taxes in most cases. The recipient can opt to pay the gift taxes if they so decide.

Gifts that are taxable are often estates left to beneficiaries from a parent or married couple, gifts given to organizations, and gifts from employers to their employees. These gifts may be taxed through income taxes if the increase the gross income of the recipient. 

Tax Deductions for Seniors

There are tax deductions that senior citizens can make in order to keep money saved for retirement from being paid to the IRS for tax purposes. These tax deductions are listed by the IRS when a taxpayer is filing a tax return for the past tax year. These deductions include expenses for receiving medical care, owning a business, making investments, and making charitable donations. A senior citizen can also receive deductions for selling their home and by filing a standard deduction on their tax return. Doing so will help the elderly person continue to save their money during their retirement.

Tax Credits for the Elderly or the Disabled

In order to apply for this tax credit, the taxpayer must meet eligibility requirements set by the Internal Revenue Code. For a senior citizen, they must be at least 65 years of age and not exceed income limitations established by the IRS. For a person with a disability who is under the age of 65, they must be receiving disability payments and cannot have worked at all in the year prior to applying for the tax credit.