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Financial Terms and Glossary

Definition of Retirement Plan

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A retirement plan is a strategy or device used to provide income in the later years of life when one can no longer work for an income. The goal most plans is to provide enough income to live on and hopefully enough income to maintain the retirees current lifestyle.

Included in retirement plans are pensions, IRAs, 401ks, social security, and savings. It is often a good idea not to rely on a single one of these items, but to have more than one and, in some cases, all of the above. In today's work environment, pensions provided by the employer's company are becoming rare. Most people today need to save for retirement on their own with a 401k plan or an IRA. These are savings plans designed specifically for retirement as they are tax deferred (taxes are payed later) until the savings is used in the retirement years.

In many cases it is a good idea to discuss your retirement plans with a professional financial planner who can plot out a strategy based on your goals, your current income, and your current savings.

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