Did you know only 40 percent of Americans have calculated how much they need to save for retirement? Or that the average American spends roughly 20 years in retirement? Most Americans don’t have a savings account, and less than a fourth of the population are actively contributing to a retirement account. The reality is most Americans are unprepared for retirement. 

We know that planning for retirement is complicated. There are so many options, rules, and regulations, it can all be overwhelming. Ideally, you will start a retirement plan early, but you are here now and it is time to start saving

We will take you through how to start a retirement plan, the various options available for retirement savings, and the crucial information about each option. At the end if you have any questions, schedule a consultation with us, and we will help you start saving

How to start a retirement plan

Here are a few initial questions to get you started in thinking about retirement. The second part offers a breakdown of each retirement account available. 

What retirement resources are available to you by employment? 

If you are employed by a private or public employer, see if your employer offers an employer-sponsored retirement plan. If your employer offers a retirement plan, do they match any portion of the money you contribute? If so to the initial question, especially so to both, direct your first savings into that account until you max out the annual contribution. Even if your employer does not offer matching contributions, having that retirement account available is an amazing resource and investment. 

If your employer does not offer a 401(k), or you are self-employed, invest in an Individual Retirement Account (IRA). You can contribute up to $6,000 ($7000 if you are 50 or older) into an IRA each year.  

What is your annual income? 

When planning your retirement, you will need to calculate your future needs. Experts agree to maintain your standard of living, it will require between 70-90 percent of your pre-retirement income. 

What are your present and future goals? 

This question is necessary but difficult to answer. If you are in your thirties and just starting to save, this question will inevitably evolve with age. If you are in your fifties and eyeing retirement, you may have more tangible goals. At each step in life, goal setting can be an advantageous way to get prepared. Your financial advisor can help you devise a savings plan that is realistic for your present financial needs while meeting your financial goals. 

The truth is that there may be periods of time in your life where you have little to save, or are financially stressed. In these moments, it is imperative that you adjust your financial goals and save as much as you can, whenever possible. The overarching goal is saving, even in small amounts because whatever amount, you are investing in your future. 

How much should I be saving? 

Experts say you should aim to save 10-15 percent of pretax income. 

What are the various types of retirement accounts? 

401(k) plan

A 401(k) plan is a defined contribution plan offered by employers to their employees. In this retirement plant, your employer may match a portion of an employee contribution. One of the greatest advantages to this plan is that saving can be automatic because the money is taken out of your paycheck. 

This plan offers significant tax advantages: a 401(k) allows individuals to save three times as much as an individual retirement account (IRA). Moreover, investment growth is tax-deferred insofar as the money remains in the account until retirement. 

No plan is perfect; a 401(k) is managed by a plan administrator, they select your investments and that selection is usually limited. Moreover, there is the possibility of fees on investments. Regardless of your 401(k) plan, the money contributed lowers your taxable income for the year, and your retirement account accrues tax-deferred growth on investment gains. 

Traditional IRA

A traditional IRA is an individual retirement account (IRA) that is funded by pre-tax dollars. The money contributed each year is deductible from your taxes for the tax year. Upon retirement or reaching 59.5 years old, the money withdrawn from this account will be subject to income taxes. You can make a contribution at any age, but the contribution must be earned, taxed income.

Roth IRA 

A Roth IRA is an individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis. Contributions to a Roth IRA are not tax deductible as the account is funded by post-tax income. The benefit of this account is that your money grows tax free and withdrawals in retirement or upon reaching 59.5 years old are tax free. You can make a contribution at any age but the contribution must be earned, taxed income. 


This is a simplified employment pension. In this account, the employer alone contributes, not the employee. The maximum contribution is 25 percent of the net earnings. This plan offers employers more flexibility on the amount of contributions and the timing of the contributions. An employer does not have to contribute every year, but if an employer does contribute, they must do so for all eligible employees—up to 25 percent of their compensation. 


This is a savings incentive match plan for employees, it’s a hybrid of an IRA and 401(k) plan. It is the best option for small businesses with one hundred or fewer employees because it offers flexibility and is generally less expensive than other plans. 

The SIMPLE IRA follows the same rules as the SEP IRA, but offers a lower maximum contribution amount. Employees can contribute to this account, but the employer is required to match up to three percent of the participating employee’s income to the plan each year, or a fixed two percent to every eligible employee’s income regardless of their participation in the SIMPLE IRA. The employer contributions are tax-deductible, and employee contributions are pre-tax income. 

Defined Benefit Plan

This is an employer sponsored retirement plan that calculates employee benefits based on a formula considering various factors such as length of employment, salary history and age. The employer manages the plan’s investment and risk, therefore making this fund different from other retirement funds because the payout amounts depend on actuary calculations. If the investment yields a shortfall, the employer is responsible for making up the difference with a cash contribution. Upon retiring an employee cannot withdraw funds like in other retirement plans. The money, with eligibility, as defined by the plan’s rules will be distributed as a lump sum at a certain age, lifetime annuity, or qualified joint and survivor annuity. 

Cash Balance Plan

A cash balance plan is an employer sponsored retirement plan in which the employer credits a participant’s account with a set percentage of their yearly compensation plus interest charges. The rules associated with the Cash Balance plan follow the Defined Benefit plan, but the contribution limits increase with every age. Like the Defined Benefit plan, the employer guarantees that the plan will grow and must make up the difference between promised yield and actual yield. This plan is great for employers with fifteen or fewer employees per owner, and have a steady revenue to create a viable retirement plan for their business as it reduces taxable income while allowing the investments to grow tax-deferred and accelerate retirement savings

What are the annual contribution limits for each type of retirement account?

Account Type Annual Contribution Limit
401(k) $19,500 under 50, $26,000 50 or older
SEP-IRA $57,000 
SIMPLE IRA $13,500 or 25% of compensation under 50, $17,000 50 or older
Traditional IRA $6,000 under 50, $7,000 50 or older
Roth-IRA $6,000 under 50, $7,000 50 or older
Defined Benefit Plan Varies – Determined actuarially based on compensation and age.
Cash Balance Plan Varies – Determined actuarially based on compensation and age.

Smart retirement advice 

  1. Do not withdraw from these accounts before the specified time. There are large penalties and significant tax consequences. Additionally, you’ll lose tax benefits, principal, and interest on your investments. Your retirement account is for your retirement. It is of the utmost importance that you, in addition to this account, have a savings account to accommodate your present financial needs or emergencies. 
  2. Make saving a habit. Habits take time to form and practice to solidify, so implement a saving structure that works for you. However much you save, it’s an investment in your future. There is no amount too small.
  3. Start early if you can. The sooner you set money aside, the more time it has to grow. 
How Considine & Considine can help you

Starting a retirement account can be challenging, there are various options and you need to know which one will fit into your personal finances best, and maximize your future goals while meeting your present financial needs. The goal of retirement planning is to ensure a stable retirement.

Are you looking for a CPA firm to help with your retirement plan in San Diego?

Here at Considine & Considine, we have expert CPAs that can help you find the plan that best suits you or your business. Our retirement department takes a proactive approach to help you find the best plan for you and your goals, help you meet your savings goals, and ensure you qualify for the IRS’s approval. 

Connect with us so you can start saving today. 

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