US pension insurance is a part of the social security system. The contribution rate is set at 7.65%; this amount must be paid by both the employee and his employer: so, the total contribution amount is 15%. A part of the percentage goes for further medical care in old age, but the major part is exclusively spent on the pension formation. If you work as an individual entrepreneur, you pay double the amount, both as an employee and employer.
The State insurance old age pension is the main type of pension received by most Americans. We will talk about it in the context of age, conditions of receipt, and size. Let us briefly describe other types:
You can send a part of the percentage paid to the pension fund to the accumulation fund to form the funded part of the pension. There are both public and private funds of this kind. The advantage of this method is that the funds deposited in funds grow at interest rates (usually 9% per year), and by the time you reach retirement age, you can get a good increase in your basic insurance state pension.
American citizens have also the right to independently conclude agreements with non-governmental organizations regarding the payment of a “private” pension in the future. In such cases, an account in the name of a future retiree is opened; it is called an individual retirement account (IRA), where a citizen has the right to deposit money. The transaction is not subject to taxation if the deposited amount does not exceed $2,000.
When a person turns 60, he gets access to money in this account, but financial experts advise not to spend these funds but to purchase a deferred retirement annuity. If a person decides to withdraw money, he will have to pay tax, but until that moment the money in the account is not subject to any fiscal fees. The best age to retire is 72 years, as you can combine your own savings, 401 (K) or IRA funds, and buy QLAC.
Qualified Longevity Annuity Contract (QLAC) is a deferred annuity funded by an investment from a Qualified Retirement Plan or IRA. Annuity contract is a guarantee of monthly payments until death; it is protected from stock market downfalls. As long as annuity meets the IRS requirements, it is exempt from the required minimum distribution (RMD).
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