Plan for retirement

With the market downturn resulting in significant losses to many retirement accounts, it may be wise for customers to consult with a tax advisor to discuss which plans will best meet your future needs.
Whether you’re a stay-at-home parent, an employee or a small business owner, now may also be an opportune time to speak with your tax advisor about making a 2009 tax year contribution to your traditional or Roth individual retirement account (IRA) before the April 15, 2010 deadline.
When deciding which retirement plans make the most sense for your needs, consider the potential benefits of these IRA plans or consult your tax advisor about other retirement plan options:
Traditional IRA. A traditional IRA retirement plan allows you to set aside and invest a set amount of money per tax year. While potential tax advantages vary depending on your financial situation, contributions to this type of plan may be tax deductible, and earnings grow tax-deferred, so you don’t pay taxes until you withdraw the funds. This is an advantage, if you expect to be in a lower income bracket when you retire. You must begin withdrawing from your traditional IRA by April 1 following the year in which you turn 70 or you will be subject to a penalty equal to 50% of the amount you should have withdrawn.
Roth IRA. Bearing the name of the late U.S. Senator from Delaware ,William V. Roth Jr., this IRA was established under the Taxpayer Relief Act of 1997 and is an individual retirement account for which contributions are made with after-tax dollars. Unlike traditional IRAs, earnings on qualified withdrawals are tax-free, and there is no required minimum distribution schedule (you are not required to begin withdrawals by a certain age limit).
Simplified Employee Pension (SEP) IRA. A SEP IRA is an employer-sponsored retirement plan that uses IRAs to minimize costs and paperwork. Each employee sets up a SEP IRA, a tax-deferred retirement account. A business or self-employed individual makes tax-deductible contributions to the SEP IRA. Once an employer makes a contribution for an employee, the funds belong to the employee and are subject to traditional IRA rules.
For employers, the tax benefits include: Contributions that are tax-deductible business expenses; flexibility on how much to contribute, up to the IRS-imposed limitations, or whether to contribute at all; and a retirement plan that may be easier to set up and more economical to administer than a 401(k) plan. For employees, the advantages include contributions and earnings that are tax-free until withdrawn. You must begin taking money out of your SEP IRA by April 1 following the year in which you turn 70.
Consult a tax advisor for complete details about eligibility and the contribution limits for each of the above retirement plans.
The foregoing article is intended to provide general information about saving and is not considered financial or tax advice from Union Bank.
Frank Robinson is the segment manager for Business Diversity Lending for Union Bank, N.A., responsible for administering a special purpose credit program to help minority-owned companies secure business financing on a bank-wide basis. Union Bank, N.A. is a full-service commercial bank with 340 banking offices in California, Oregon, Washington and Texas and two international offices. UnionBanCal Corporation is a wholly-owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJ Financial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world’s largest financial organizations.