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Supplement Your Pension

Need more retirement income? A pension alone might not be enough

February 6, 2013
The Intelligencer / Wheeling News-Register

Pensions for retirement aren't as common these days. People change jobs frequently during their lifetime and often don't amass a sufficient pension for full retirement.

Many individuals don't get a pension at all. Whether you're expecting a sizable pension, or something much smaller, supplementing it with other retirement investment accounts will give you extra cash to support your lifestyle during retirement years.

Employer Options

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What kind of retirement accounts are available through your employer? Many employers offer a 401K, or a 403B if you work for the government.

When you set up a 401K, you can contribute money tax-free. When you withdraw it during retirement, you pay income taxes on the initial contributions and earnings. The money that would have gone to taxes can stay in your account for many years until you retire earning more money through capital gains and dividends.

Some employers will match your contributions up to a certain percent. For example, they might match 50 percent of your contributions if you contribute up to 5 percent of your income or match 100 percent if you contribute 6-10 percent of your income. It is meant as an incentive to encourage you to invest for retirement. Don't miss any opportunity for free money.

If you get an employer match through your company, it's usually a good idea to contribute the maximum amount to your 401K. After that, you can set up an IRA or Individual Retirement Account.


There are two types of IRAs, the traditional IRA and the Roth IRA.

A traditional IRA is very similar to a 401K with a few differences. You contribute you pre-tax dollars now and pay taxes on everything when you withdraw money during retirement. However, there is no opportunity for an employer match. One benefit is that you can invest it in any mutual fund instead of using the company-chosen fund.

A Roth IRA is a bit different. You don't invest pre-tax dollars. Instead, you pay taxes on all your contributions now, but when you withdraw it during retirement, you don't have to pay any taxes, not even on the earnings. You can earn a large return and not pay any taxes on it as long as it stays in your account.

Another benefit is that you can withdraw your contributions before retirement without penalty if you need to because you already paid taxes on it.

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