Preparing for Retirement
What are Retirement Accounts?
Retirement accounts are tax-advantaged accounts meant to help you save for the future. Most retirement accounts don’t allow penalty-free withdrawals before you’re 59 ½, though there are some exceptions to this rule. Your employer may offer you a retirement account or you can open one on your own. You can have both.
Types of Retirement Accounts
Individual Retirement Accounts
There are two types of Individual Retirement Accounts (IRAs).
Traditional IRAs: Funded with pre-tax income that is taxed upon withdrawal
Roth IRAs: Funded with post-tax income and withdrawals are tax-free
Money in an IRA needs to be invested to grow. Northwest Access Fund is not able to offer investment advice. You can have both a Traditional and Roth IRA, but your combined contributions can’t go over the annual contribution limit. In general in 2025, the maximum annual contribution limit is $7,000 for those under age 50 and $8,000 for those age 50 and older, but factors like your income and tax filing status can affect how much you can contribute. A tax professional can help you understand your contribution limits.
Employer-Sponsored Retirement Accounts
There are two types of employer-sponsored retirement plans.
Defined-Contribution Plan: An account managed by an employer like a 401(k), 403(b), or SIMPLE IRA. The employee chooses how much of their paycheck to invest into the account. Your plan may offer a list of investment options to choose from. Northwest Access Fund is not able to support you with choosing investments. Defined- contribution plans have annual contribution limits. Your HR department can tell you the contribution limits for the plan they offer.
Defined-Benefit Plan: A monthly benefit paid to an employee upon retirement commonly referred to as a pension. The employer is responsible for making contributions to the plan and investing the funds.
Social Security Retirement
You can claim Social Security Retirement benefits starting as early as age 62. You can also choose to delay receiving your benefit. Your benefit increases the longer you wait, up to age 70. To qualify for retirement benefits, you need to have worked at least 10 years in jobs that paid into Social Security. Your benefit depends on your earnings when you were working. You can see a personalized monthly benefit estimate by creating a mySSA account.
Disability Benefits and Retirement Accounts
If you receive benefits that have asset limits, like SSI and Medicaid, money in a retirement account will count toward your asset limit. Be careful not to let investments put you over your asset limit as they grow.
If you receive benefits with an asset limit and want to save for retirement, you can use an ABLE account or a Special Needs Trust. ABLE accounts are tax-advantaged savings accounts for people with disabilities that began before age 26. Special Needs Trusts are a type of trust that can help you maintain eligibility for benefits with asset limits and need to be set up by an attorney. Money in an ABLE account or Special Needs Trust will not count toward your asset limit.
How Much Should I Save?
Everyone’s needs are different and there isn’t a one-size-fits-all answer. A financial advisor can help you understand the right amount for you. Northwest Access Fund isn’t able to tell you how much you should save for retirement.