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How is retirement in your country?
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[QUOTE="jtbell, post: 5680039, member: 20524"] In the US: 1. The national government pension scheme is Social Security, as already noted. It's funded by a special income tax ("payroll tax"), in addition to the normal income tax. The amount that you receive depends in a complicated way on how much income you've paid tax on during your career, and on when you start to receive it. The calculations are based on a "normal retirement age" of 65 through 67 (depending on when you were born), but you can actually choose to receive a lesser amount starting as early as age 62, or a larger amount starting as late as age 70. There are well-known long-term funding problems with Social Security. There will certainly be changes during the next 20 years, perhaps even during the next few years, and they will certainly be accompanied by great political controversy. 2. Some companies provide their employees with pensions. However, during the past few decades, many companies have replaced them with 401(k) plans, as below, for new employees. I think most people who now are eligible for pensions work for old, large companies or for the government (federal, state, or local), including professors at many state universities. Sometimes these pensions are in addition to Social Security, sometimes they substitute for Social Security. Government-employee pensions in some states and cities are underfunded and subject to controversy and potential cuts. For example, the city of Detroit went bankrupt recently; I think it had to reduce pensions for people who were already receiving them. 3. There are various schemes by which people can save part of their wages in a tax-advantaged way. Basically, the amount saved is excluded from current income taxes, but when you withdraw the money in retirement, you have to pay income tax on the entire amount. If you set up one yourself, it's called an IRA. If you enroll in one through a for-profit employer (company), it's called a "401(k) plan." If you enroll in one through a non-profit employer (university, school, church, etc.), it's called a "403(b) plan." There are some other variations. The money can be invested in various ways, depending on the individual plan. In an employer-sponsored plan, the employer often contributes some money in addition to your contributions. They all have somewhat different rules, but generally you must wait until about age 60 to start withdrawing money, and at age 70 you must start to withdraw a certain percentage annually (and pay taxes on it!). 4. You can also of course save money (after paying income tax on it) in the usual variety of ways: savings accounts, the stock and bond markets, real estate, etc. Different people use different combinations (and amounts) of the above. I've just retired, and will be using #1 (delaying until age 70), #3 and #4. A common rule of thumb for people who are currently working, and who do not have a pension as in #2 above, is to aim to save at least 15-20% of their salary under #3 and #4. [/QUOTE]
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