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Voice of America

Will I have
enough money
for retirement?


I'm Steve Ember with the VOA Special English Economics Report.

One of the most important questions
a worker can ask is: “Will I have enough money for retirement?”

For more than thirty years, Americans have used Individual Retirement Accounts, or IRAs, to increase retirement savings. Today, there are several plans
that let workers invest. The plans also offer tax savings. The Employee Retirement Income Security Act of 1974 provided for the first IRAs. It set rules for retirement plans run by big businesses. Other measures provided for individuals who did not qualify for such plans, called pensions.

The first kind of IRA is now called a traditional IRA. A worker can put up to 4,000 dollars of his or her yearly earnings into a special account. Workers over the age of 50 can invest 4,500 dollars. Unlike a pension, the saver controls the account and decides how it is invested.

Money put in a traditional IRA is not taxed until it is withdrawn. But, savings cannot be withdrawn before the account holder
is 59 and one half years old. If the money is withdrawn before that time, it is taxed like income and there is a 10 percent fine. The account holder must start withdrawals by age 70 and a half or there also are fines.

At first, IRAs were only for people not covered by pensions at work. But in 1981, everyone could open an IRA. Six years later, congress banned highly paid individuals from claiming tax reductions.

A Roth IRA is a similar plan. Workers can invest up to four thousand dollars of earnings yearly. But there is no tax savings on the year's earnings. Instead, withdrawals from a Roth IRA are generally not taxed.

Roth IRA withdrawals cannot start until the saver is 59 and one half years old. There are also fines for putting too much money in them. But people over 70 can still invest.

Small businesses can also set up a kind of IRA. Simplified Employee Pensions, or SEP IRAs, have elements of both traditional IRAs and pensions.

SEP IRAs are simple investment accounts controlled by the saver. And, like pension plans, employers
add money to them too. Limits on these accounts are higher. A worker and an employer can invest 25 percent of the employee's yearly pay up to 42,000
dollars. The money is not taxed until it is withdrawn.

This VOA Special English Economics Report was written by Mario Ritter. I'm Steve Ember.

retirement savings: ahorros de retiro; invest: invertir; tax savings: ahorros impositivos; it set rules: estableció normas; run by: administrados por; up to: hasta; yearly earnings: ingresos anuales; unlike: al revés de; saver: ahorrista; invested: invertido; taxed: gravado; withdrawn: retirado; income: ingreso; banned: prohibió; highly paid individuals: individuos con sueldos elevados; claiming: reclamar; yearly: anualmente; set up: estableció, fijó; yearly pay: paga anual, sueldo anual.

Source: VOA - Voice of America

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