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Prepare for Retirement

 Planning for retirement can be intimidating. How much income will you receive from Social Security or your pension? How much more will you need to save to live comfortably in retirement? Do not let these questions hold you back from getting started.

Even small amounts saved consistently over time can help you build a nest egg if you start early. Take a close look at your budget today, calculate how much you can afford to save each month, and how these savings can grow to retirement.

All Californians have access to CalSavers, a new retirement savings plan for workers whose employers do not have a retirement savings plan, self-employed individuals, or anyone who wants to save extra amounts. Start investing in your future today.

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     Key Terms

    401(k): A defined contribution plan that is a cash or deferred arrangement. Employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the 401(k) plan. Sometimes the employer may match these contributions.

    Defined benefit: Defined benefit pension plans provide employees with guaranteed retirement benefits based on benefit formulas. An employee’s retirement age, length of service, and preretirement earnings may affect the benefits received.

    Defined contribution: the employee or the employer (or both) contribute to the employee's individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee's behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. 

    Lump sum payout: The participant may opt for a full lump sum, with no further benefits received from the plan. If a plan provides for a partial lump-sum payment, the participant receives a reduced annuity as well.

    Pension: Generally, any plan, fund, or program that an employer and/or employee organization establishes or maintains to provide retirement income to employees.

    Reverse mortgage loans: A special type of home loan only for homeowners who are 62 and older. With a reverse mortgage, the amount the homeowner owes goes up—not down—over time.

    Social security: Provides benefits for retired workers and people with disabilities, as well as the unmarried children, surviving spouses, or former spouses (in certain cases) of both.

    Vesting: Vesting is the period of time a participant must work before earning a non-forfeitable right to retirement benefit. Once the participant is vested, the accrued benefit is retained even if the worker leaves the employer before reaching retirement age.