How people save for retirement has changed dramatically over the years. In years past, many workers counted on their employers to contribute to a pension plan on their behalf. For many retirees, the combination of a decent pension benefit and a monthly social security check has made for a comfortable retirement.

Those days unfortunately are over. With employees changing jobs more than ever, companies looking to cut costs wherever they can, and social security a big question mark for young professionals, the burden of saving for your retirement falls on your shoulders.

On average American workers can expect to live 18 years in retirement, and as a general rule they need 60-80% of their pre-retirement income to maintain their present standard of living. Following is some general information on employer-sponsored retirement plans and personal savings and investment options available; it is not meant to be a substitute for a one-on-one meeting with a financial advisor. Regardless of how many years you have until retirement it is important to meet with a professional financial advisor and develop a retirement plan that is right for you.

Employer-sponsored Retirement Plans
Most employers offer either a 401(k) plan or a 403 (b) plan as part of their benefit package. If you work for a company that offers either of these plans, you should try to contribute to it on a regular basis. Money contributed reduces your federal taxable wages and grows tax deferred. The maximum allowable contribution is currently $11,000 per person, limited to either 15% or 20% of your salary.

Benefits of 401 (k) plans include:

• Your taxable income is generally reduced by the amount you contribute to this plan so your current taxes are reduced accordingly.

• Your employer may contribute matching funds as a percentage of your investment.

• 401 (k) plans are designed to be a tax deferred investment vehicle specifically for retirement. Once the money is in your 401 (k), you generally cannot make a withdrawal prior to age 59 ½ unless certain conditions are met such as retirement, death, disability, or separation from service. Income taxes are due upon withdrawal.
   

Keogh Plans

Keogh plans are tax-deferred retirement savings for people who are self-employed. Usually 25% of your earned income with a maximum of $40,000 per year can be contributed on a tax-deferred basis. Keogh plans are however, more complicated to set up than IRAs. To make sure your plan is properly implemented, be sure to get tax advice before the plan is set up.

Personal Savings and Investments

Because income from social security and employer-sponsored plans may not meet your retirement income needs, it is important for you to consider personal savings and investments.

IRA's
IRAs are the most basic of all retirement options. Whether you choose a traditional IRA or a Roth IRA, the maximum total contribution per couple is $6,000 per year in 2003 (increasing to 10,000 per couple in 2008); provided at least you or your spouse has earned income in excess of the amount contributed to the IRA.

There are currently two types of IRAs:

• Traditional IRAs: Traditional IRAs were established by the federal government to encourage people to save for retirement. Generally, traditional IRAs require that ordinary income taxes are due upon withdrawal. Although there are some exceptions, there may be penalties for taxable withdrawals before age 59 ½. Amounts contributed to a traditional IRA may or may not be tax deductible, depending on whether you or your spouse are covered under a retirement plan at work, but they always grow tax deferred.

• Roth IRAs: Amounts contributed to a Roth IRA are never tax deductible but grow tax-free provided certain qualifications are met at the time of withdrawal. Married couples whose adjusted gross income exceeds $160,000 are not eligible to contribute to a Roth IRA.