Different types of Retirement income streams for nurses
While working as a nurse you will be most likely be in a position to participate in many different retirement plans either through working for different employers or by establishing one yourself. We will break down some of the major areas that can create income for you in retirement:
A 401(k) is a plan that will be set up by your employer and it will allow you to automatically have money withdrawn from your paycheck and deposited into the plan. Very often the employer will match a percentage of the what you as a nurse deposit and that makes the plan more attractive. 401(k) plans will allow you to defer your taxes and until the day when you start taking out money unless your employers offers a Roth option which will then allow you to pay your taxes up front. A 401(k) may have a loan option so that you can borrow money from your plan assets but in general you will have to wait until after age 59 ½ before you can access the money. If you do decide to take withdrawals before 59 ½ you will have to pay additional tax penalties. It is important to fully understand the plan and understand that the taxes that are not paid up front are simply deferred into the future.
An individual retirement account can be set up and you can put money into it as long as you have earned income. There are income limits that will determine if you are able to contribute a deductible contribution. The IRA does just like the 401(k) have a Roth option that would allow you to put money into the plan on an after tax basis and then have access to tax free withdrawals in the future.
If you are lucky your employer has set up a pension for you where money is being contributed. A pension will give you a stream of income when you retire and can be a great supplement to all of your other accounts. Many companies do not offer pensions any more but there are still a few that provides this additional great benefit. Before you start getting your pension there are many decisions to make. Very often you will have to decide if the stream of income is going to last for your lifetime only of if you want to have an additional lifetime income stream for your spouse.
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As you work you continuously pay into the social security pool of money and the plan is that when you reach retirement you will be able to receive monthly stream of money from the program. There are different ages at which you can start your social security income and the amount payable is higher the later you start your withdrawals. Normal retirement age for social security benefits is age 66 but you can start taking the income as early as age 62 or as late as age70.
If you have acquired investment real estate and the rental income that you receive is higher than your mortgage or if the loan is completely paid of you now have a stream of income that will continue to pay you and your family until you decide to sell the property. Income producing real estate can be great as long as you have the energy to manage the process or you can hire someone who can help you manage the property.
Annuities work in the same way as a pension and can for people who do not have pensions be an excellent way to generate an income stream for life. Annuities consist of an accumulation phase where money grows and then it consists of a distribution phase where an amount is paid out every month to the annuitant on the plan. The amount of money that gets paid out depends on how much money has been accumulated inside of the plan as well as on age of the annuitant.
Cash Value inside of Life Insurance
Many permanent life insurance policies have, in addition to the death benefit, a cash accumulation account that grows over time. The cash build up inside of life insurance policies will grow on a tax deferred basis and even though it does not grow as fast as money being invested in the stock market it can be a great addition to your retirement strategy. The guarantees behind certain policies allow for confidence that there will be no market corrections happening within the policies and therefore a more predictable future value can be established.
Regular investment account
In addition to having money invested in your 401(k) , IRA it can be very beneficial to also have a general investment account that does not follow the tax rules that are built in the traditional retirement plans. Having money invested outside of the qualified tax plans allow you to access cash before 59 ½ without any tax penalty and will give you more flexibility around tax planning and around when you feel like retiring.
Written By CreativeNurse Team
2016-25442 Exp. 10/17