• Fact #1: People are living longer - In 1950, the average life expectancy was 65 years.  Today, it is 76 years of age.  That's almost a 20% increase.  Obstacle:  There is a greater chance of outliving retirement resources.
  
  
• Fact #2: Social Security may not be enough - Example:  Bob, age 35, currently makes $40,000 a year.  At age 65, after a salary increase of 3% each year, he will make $97,090.  If Bob retires at age 65 and begins collecting Social Security he could receive approximately $32,137 annually.  Obstacle:  Social Security benefits might account for only 30% of your retirement income.
  
  
• Fact #3: It is estimated that the average person will need 80% of their current income to live comfortably in retirement - Bob will need approximately $77,672 annually in retirement.  Obstacle:  Bob will need to bridge the $45,535 gap between Social Security and a comfortable retirement.
  
  

• Eligibility: Workers or non-working spouses under age 70 ½
  
  
• Contributions: Contributions may be tax-deductible if you meet certain income requirements. Maximum annual contribution of $3,000 (for 2004).  Spouses can contribute an additional $3,000.
  
  
• Tax Consequences: Earnings accumulate tax-deferred until withdrawal. Withdrawals prior to age 59 ½ may be subject to income and penalty tax.
  
  
• Income Restrictions: None
  
  
• Withdrawal Requirements: Must begin by age 70 ½.  May begin before age 59 ½ for certain medical, education and home purchase expenses.
  
  

• Eligibility: Workers or non-working spouses of any age
  
  
• Contributions: Contributions are NOT tax-deductible. Maximum annual contribution of $3,000 (for 2004).  Spouses can contribute an additional $3,000, subject to certain income limitations.
  
  
• Income Restrictions: Apply at income levels of $95,000 – 110,000 for singles and $150,000 - $160,000 for couples.
  
  
• Tax Consequences: Earnings accumulate tax-deferred and may be withdrawn tax-free if the Roth IRA is at least 5 years old and you are at least 59 ½.  Withdrawals prior to age 59 ½ may be subject to income and penalty tax.
  
  
• Withdrawal Requirements: There are no minimum withdrawal requirements.  Penalty free withdrawals may begin at age 59 ½ or earlier for certain medical, education and home purchase expenses.

When you change jobs or retire early, it may be tempting to take the money in your employer-sponsored retirement plan.  However, by instructing your employer to give you possession of your assets directly, your employer will be required to withhold 20% of your distribution for the IRS.  From this point, you have 60 days to reinvest 100% of your distribution (including the 20% withheld by the IRS) in another employer-sponsored plan or IRA. If you miss this deadline, you will be subject to another 10% penalty tax in addition to applicable federal income tax.

Roll it over into a Rollover IRA!
To avoid paying taxes and penalties, you can establish a Rollover IRA.  With a direct transfer, you suffer no tax consequences, and your retirement plan assets can continue to grow tax deferred.