More options for saving for your retirement

This was originally published on Monday, April 15, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Gone are the days of retirement that most of our parents enjoyed. We can no longer expect our employer pension and social security benefits to get us through the golden years. Planning for retirement is necessary. Last week I discussed two retirement plans, IRAs and 401(k). Here are more retirement plans:

403(b) — Is a retirement fund very similar to a 401(k) but is available only to certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. To set up an account you must go through your employer.

Profit-Sharing Plan — Is a plan set up by an employer to give employees a sense of ownership in the company. The company decides what percentage of profit will be shared. Employees do not contribute to the plan only the employer. There may be penalties for early withdrawals.

Money Purchase Plan — Is a pension plan in which the employer and the employee make contributions. The contributions are based on a percentage of annual earnings. The employee’s benefits are based on the amount of contributions to their account, whether it is a gain or loss, at the time of retirement. In other words the employee is responsible for the amount available at retirement.

Employee Stock Ownership Plan (ESOP) — Is a plan that gives employees the opportunity to buy stock of their employing company. There are certain tax benefits that both the employer and employee share. This plan encourages employees to do what is best for the company’s shareholders since the employees themselves are shareholders.

Take advantage

If your employer offers a retirement plan you really should consider participating. Especially if the plan requires that your employer matches your contributions. Many retirement funds provide great tax incentives that may reduce your end of the year tax payments. The Internal Revenue Service website,, offers more information on these plans. Know what your contribution limit is. If you can max out your contributions do so. It definitely will ensure a comfy nest egg when you retire.

Consider participating in more than one retirement plan. An investment mix that has a good balance between asset allocation and diversification is wise. Asset allocation spreads out your investment risk through various types of investments (cash, stocks, bonds, etc.). Asset allocation is a strategy that tries to balance your risk versus your reward. Diversification mixes a wide variety of investments to reduce risk within your portfolio which allows for a more stable performance of your money under different economic conditions.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


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