Recent studies have found that during retirement the average American needs between 60 and 80 percent of their pre-retirement income in order to maintain their pre-retirement standard of living. Almost everyone needs less money during retirement than before. How much you need during retirement will be a function of your personal spending habits. Consider the following factors in estimating your retirement income needs:

• You may be supporting children now who will be self-sufficient by the time you retire.
• Your work related expenses would be dramatically reduced, if not eliminated, once you retire (commuting costs, daily meal expenses, licensing fees, etc.).
• For many, their mortgage will be paid off either by the time they retire, or within a matter of a few years after retirement, reducing housing expenses.
• Hopefully you are saving money on a monthly basis for retirement. During retirement you can plan your needed monthly income without factoring in a “retirement saving” amount.
• Many retirees find themselves in a lower income tax bracket. This is due, in part, to having their main sources of income change from fully taxable earned income to tax advantaged income sources.

Once you have estimated your target retirement income, you are ready to begin to evaluate what sources of income will be available to you to meet your monthly needs. Generally speaking, your sources of retirement income fall into three categories, which we will discuss below.

Government Sources. The federal government has created something of a “safety net” for retirees called Social Security. Social Security is available to everyone, but the amount you receive will be based on how much you earned during your working years.

Company Sponsored Plans. Many employers offer company sponsored retirement plans. These plans come in many forms but generally can be broken into two categories.

Defined Benefit Plans are normally funded entirely by the employer and guarantee a retirement benefit based on a combination of years of employment and employment earnings.

A Defined Contribution Plan may be funded by the employer, employee or a combination of the two. The employee owns an account balance (subject to vesting) made up of contributions and earnings. At retirement, the employee decides how they will withdraw the balance they have accumulated.

Personal Savings. The most important, and often most overlooked, source of retirement income is one's own personal savings. Savings directed to IRA accounts, directly held assets, home equity, etc. will largely determine how financially secure your retirement years will be.

There are many ways that proper planning can improve your current retirement outlook.

The more time you have to prepare, the more change you can effect in your retirement income.

A sound financial plan and ongoing professional advice can help you obtain your retirement objectives

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice.

Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.

The following is a summary of retirement plans:

• 401(k) - A section 401(k) plan is a type of tax-qualified deferred compensation plan for businesses in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pre-tax basis. These deferred wages (commonly referred to as elective deferrals) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 since they were not included in the taxable wages on your Form W2. However, they are included as wages subject to social security, Medicare, and federal unemployment taxes. See 401(k)
• The maximum employee contribution is $18,000 in 2015 and 2016.
• The annual additions paid to a participant's account cannot exceed the lesser of:
• 100% of the participant's compensation, or
• $53,000 ($59,000 including catch-up contributions) for 2015 and 2016.
• Catch-up - if the employee is aged 50 and older, an additional "catch-up" contribution is allowed. The additional contribution amount is $6,000 in 2015 and 2016.
• Withdrawals of contributions and earnings are subject to federal and most state income taxes.

• Roth Accounts: Designated Roth contributions are elective contributions that, unlike pre-tax elective contributions, are currently includible in gross income. However, the investments grow tax free and earnings may be withdrawn tax free after age 59 1/2 as long as the account has been open 5 years, or if you are disabled or after death.
• SIMPLE Plans (SIMPLE IRA, SIMPLE 401k): Are plans for the small business owners with 100 or fewer employees with no other retirement plans in place. See SIMPLE IRA or SIMPLE 401(k)

• SEP-IRA - Under a SEP, the employer makes contributions to traditional IRAs (SEP-IRAs) set up for each eligible employee. A SEP is funded solely by employer contributions. Each employee is always 100% vested in (or, has ownership of) all money in his or her SEP-IRA. See IRS Publication.

• To establish a SEP
• The business can be any size
• Adopt Form 5305-SEP, a SEP prototype or an individually designed plan document.
• Cannot have any other retirement plan (except another SEP) if the model Form 5305-SEP is used to establish the SEP.
• Total contributions to each employee's SEP-IRA cannot exceed the lesser of 25% of pay or $53,000 in 2015 and 2016. See SEP Contribution Limits
• SIMPLE-IRA - is a tax-deferred retirement plan provided by sole proprietors or small businesses (fewer than 100 employees) who do not maintain or contribute to any other retirement plan. See SIMPLE IRA Plan . If a SIMPLE IRA plan is adopted, employees can elect to defer part of their salary. Each employee is immediately 100% vested in (or "owns") all contributions to his or her SIMPLE IRA. Contribution limits are: See SIMPLE IRA Contribution Limits
• Employee - $12,500 in 2015 and 2016. If the employee is age 50 or over, a "catch-up" contribution is also allowed. This additional catch-up contribution amount $3,000 in 2015 and 2016.
• Employer - Generally, a dollar-for-dollar match up to 3% of pay or a 2% non-elective contribution for each eligible employee.
• Keogh - A Keogh plan is a tax-deferred retirement plan designed to help self-employed workers or individuals who earn self-employed income establish a retirement savings program. There are two different types of Keogh plans, the Profit Sharing (see Profit-Sharing) and the Money Purchase plan (see Money Purchase ). Under Keogh regulations, the Money Purchase contribution is mandatory; you must make the same percentage contribution each year, whether you have profits or not. The Profit Sharing contribution can change each year. Individuals can contribute to both types of plans in the same year.

• The contribution limits are the lesser of 25% of compensation or $53,000 in 2015 and 2016.

• Traditional IRA - Individual Retirement Account, is a tax-deferred investment and savings account that acts as a personal retirement fund for people with employment income. The maximum contribution is $5,500 annually in 2015 and 2016 with an additional $1000 if over 50 years old. There are two primary types of IRAs: Regular and Spousal. Regular IRAs are designed for individuals with earned income, while Spousal IRAs are designed for married couples in which only one of the spouses has earned income. You have the option of investing in a wide variety of investments. (See IRS Publication 590).

For Regular and Spousal IRAs: (See Traditional IRAs)

Your contribution is fully tax-deductible if:

• Neither you nor your spouse participated in a company-sponsored retirement plan.
• You contributed to a company-sponsored retirement plan: are single and earned less than $61,000 in 2015 or less than $61,000 in 2016 or married and filing jointly and had a joint income of less than $98,000 in 2015 or less than $98,000 in 2016.

Your contribution is partially tax-deductible if:

• You contributed to a company-sponsored retirement plan: are single and earned $61,000-$71,000 in 2015 and $61,000-$71,000 in 2016 or married and filing jointly and had a joint income of $98,000-$118,000 in 2015 and $98,000-$118,000 in 2016.

Your contribution is not tax-deductible if:

• You contributed to a company-sponsored retirement plan: either single and earned more than $71,000 in 2015 or more than $71,000 in 2016 or married and filing jointly and had a joint income of more than $118,000 in 2015 or more than $118,000 in 2016.

• Roth IRA - is an individual retirement account with a maximum contribution of:

• The maximum contribution for 2015 and 2016 is $5,500 with additional $1,000 contribution if over age 50.
• Contributions to a Roth IRA are not tax-deductible. However, the investments grow tax free and earnings may be withdrawn tax free after 59½ as long as the account has been open 5 years.
• Eligibility for contributions to a Roth IRA is phased out for married couples filing jointly with an AGI between $183,000 and $193,000 in 2015 and between $184,000 and $194,000 in 2016.
• See IRS Publication 590

To obtain a more detailed explanation of the various retirement plans, you can visit the IRS website at www.irs.gov.

• SIMPLE 401(k) - A section SIMPLE 401(k) plan is a type of tax-qualified deferred compensation plan for small businesses with less than 100 employees in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pre-tax basis. These deferred wages (commonly referred to as elective deferrals) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 since they were not included in the taxable wages on your Form W2. However, they are included as wages subject to social security, Medicare, and federal unemployment taxes. Under a SIMPLE 401(k) Plan, an employee can elect to defer some compensation, but unlike a regular 401 (k) plan, the employer must make either a matching contribution up to 3% of each employee's pay, or a non-elective contribution of 2% of each eligible employee's pay. See SIMPLE 401K
• The maximum employee contribution is $12,500 in 2015 and 2016.
• The maximum Employee plus Employer contribution is the lesser of 100% of the employee's compensation, or $53,000 in 2015 and 2016.
• Catch-up - if the employee is aged 50 and older, an additional "catch-up" contribution is allowed. The additional contribution amount is $3,000 in 2015 and 2016.
• Withdrawals of contributions and earnings are subject to federal and most state income taxes.

• Roth 401(k) - Business retirement account made with after tax dollars. See Designated Roth Accounts
• Only employee elective deferrals may be contributed to a designated Roth account. Matching contributions and profit-sharing contributions may not be made directly to the designated Roth account.
• The maximum employee contribution is $18,000 in 2015 and 2016. For later years, the limits are subject to cost-of-living adjustments.
• Catch-up - if the employee is aged 50 and older, an additional "catch-up" contribution is allowed. The additional contribution amount is $6,000 in 2015 and 2016. For later years, the limits are subject to cost-of-living adjustments.
• The investments grow tax free and earnings may be withdrawn tax free after 59 ½ as long as the account has been open 5 years, or if you are disabled or after death.

• 403(b) - is sponsored by tax-exempt institutions such as Public Schools, Colleges or Universities or Charitable entities tax-exempt under section 501(c)(3) of the Code. Basically, 403(b) plans are similar to 401(k) plans. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary. In this case, their deferred money goes to a 403(b) plan sponsored by the employer. This deferred money generally does not get taxed by the federal government or by most state governments until distributed.

See 403(b) Plan Basics

• The maximum employee contribution is $18,000 in 2015 and 2016.
• The maximum Employee plus Employer contribution is the lesser of 100% of compensation or $53,000 in 2015 and 2016.
• There is also a "lifetime catch-up provision" available only to employees with 15 or more years of service with a qualified organization. This provision may allow you to increase your salary deferral contributions above your basic salary deferral limit by up to $3,000 per year, up to a lifetime limit of $15,000. To qualify, you must be a long-term employee who has contributed on average less than $5,000 a year to your 403(b) plan. The 403(b) Lifetime Catch-up is called the "15-year rule" in IRS Publication 571. See IRS Publication 571